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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 purpose of cost accounting in a manufacturing firm?

Cost accounting records, classifies and analyses the cost of products and services, and supplies this information to management for planning, control and decision-making. Statutory reporting to shareholders and tax authorities is the main purpose of financial accounting, not cost accounting.

  1. ARecording the cost of products and services and providing information for planning, control and decision-makingCorrect
  2. BPreparing statutory financial statements solely for shareholders and tax authorities
  3. CRecording only the cash receipts and payments of the business
  4. DDetermining the market price of shares of the company

Explanation

Cost accounting classifies, records and analyses costs so that management can plan, control and take decisions. Statutory reporting to shareholders is the main aim of financial accounting, so option 2 is wrong.

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