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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 recognised difference between cost accounting and financial accounting?

Cost accounting reports can be prepared for any period or any cost unit, whereas financial accounting reports cover the whole business for a fixed accounting period. Financial accounting mainly serves outsiders, while cost accounting mainly serves management for planning and control.

  1. AFinancial accounting is mainly meant for internal management, while cost accounting is meant for outsiders
  2. BCost accounting reports can be prepared for any period or any cost unit, while financial accounting reports are prepared for the whole entity for a fixed periodCorrect
  3. CFinancial accounting records only future estimated figures, while cost accounting records only past figures
  4. DCost accounting is compulsory for every company under company law, while financial accounting is optional

Explanation

Cost accounting is flexible: it can report per job, per unit, per department or for a day, week or month. Financial accounting reports the whole entity, generally for a year. The option reversing the users of the two systems is wrong, as financial accounting serves external users mainly.

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