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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 for the management of a manufacturing firm?

The primary purpose of cost accounting is to give management cost information for planning, control and decision-making. Statutory financial statements for shareholders are the job of financial accounting, whereas cost accounting analyses costs of products, processes and departments to help managers set prices and control spending.

  1. APreparing statutory financial statements for shareholders
  2. BProviding cost information for planning, control and decision-makingCorrect
  3. CRecording only the cash receipts and payments of the business
  4. DComputing income tax payable at the year end

Explanation

Cost accounting mainly supplies detailed cost data to management for planning, controlling costs and taking decisions such as pricing or make-or-buy. Preparing statutory statements is the role of financial accounting, so option A describes a different function.

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