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CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Under the Cost Accounting Standards framework issued by ICAI, which statement best describes the principal difference between cost accounting and management accounting?

Cost accounting is concerned with ascertaining, recording and controlling costs, while management accounting has a wider scope and uses cost, financial and other information to help management in planning, control and decision making. It is not limited to historical or future data alone.

  1. ACost accounting uses only historical data while management accounting uses only future estimates
  2. BCost accounting is concerned with ascertaining and controlling costs, whereas management accounting uses cost and other data to support managerial planning and decisionsCorrect
  3. CCost accounting is mandatory for all firms while management accounting is prohibited by law
  4. DCost accounting deals with financial statements for outsiders while management accounting deals with tax returns

Explanation

Cost accounting focuses on cost ascertainment, control and reduction. Management accounting has a wider scope, using cost, financial and other information for planning, control and decision making. The other options overstate or misstate the distinction.

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