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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 is a difference between cost accounting and financial accounting?

Cost accounting is mainly for internal management use, whereas financial accounting reports to external users such as shareholders and tax authorities and is statutory for companies. The other statements wrongly reverse compulsion, time orientation or the type of data used by the two systems.

  1. ACost accounting is mainly meant for internal management, while financial accounting reports to external users and is statutory for companiesCorrect
  2. BCost accounting is compulsory for all proprietorship firms, while financial accounting is optional
  3. CFinancial accounting deals only with future estimates, while cost accounting deals only with past data
  4. DCost accounting uses only monetary data, while financial accounting uses only non-monetary data

Explanation

Cost accounting serves internal management and can use both monetary and non-monetary data, while financial accounting serves external users and is statutory for companies. The other options reverse or distort these facts.

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