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CMA Foundation · Fundamentals of Financial and Cost Accounting · Meaning and Significance of Cost Accounting and its Relationship with Financial Accounting

Which of the following best describes the primary focus of cost accounting in a manufacturing firm?

Cost accounting records, classifies and analyses costs to ascertain the cost of products and services and to help management control costs and take decisions. Preparing statutory financial statements for outsiders is the job of financial accounting, not cost accounting.

  1. ARecording, classifying and analysing costs to ascertain the cost of products and services and to help control themCorrect
  2. BPreparing statutory financial statements solely for shareholders and tax authorities
  3. CRecording only the cash receipts and payments of the business
  4. DAuditing the books of account for compliance with company law

Explanation

Cost accounting deals with collecting, classifying, recording and analysing cost data to find the cost of products or services and to support cost control and decisions. Preparing statutory statements is the role of financial accounting, so that option is wrong.

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