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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 point of difference between cost accounting and financial accounting?

Financial accounting reports the results and financial position of the whole business for an accounting period, whereas cost accounting analyses cost and profit for individual products, jobs, processes or departments. The other statements reverse the users or the roles of the two systems.

  1. AFinancial accounting is mainly meant for internal management, while cost accounting is mainly meant for external users
  2. BCost accounting is not concerned with ascertaining the cost of products, while financial accounting is
  3. CFinancial accounting reports on the whole business for a period, while cost accounting reports on individual products, jobs or departmentsCorrect
  4. DCost accounting is compulsory for all companies under every statute, while financial accounting is optional

Explanation

Financial accounting presents the overall profit or loss and financial position of the entire entity for a period. Cost accounting analyses cost and profit by product, job, process or department. Options A and B reverse the roles of the two systems, and D is wrong because financial accounting is the statutory requirement.

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