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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 true about the nature of data used in financial accounting and cost accounting?

Financial accounting mainly records and reports historical transactions, whereas cost accounting uses historical costs and also predetermined figures such as standards, budgets and estimates to plan and control operations, which is why the second option is correct.

  1. ACost accounting uses only historical data and never estimates
  2. BFinancial accounting deals mainly with recorded historical transactions, while cost accounting also uses standards, budgets and estimates for controlCorrect
  3. CFinancial accounting uses predetermined standards to control costs
  4. DNeither uses historical data

Explanation

Financial accounting records and reports past transactions. Cost accounting uses historical costs but also predetermined costs, standards and budgets for planning and control. The remaining options misstate this.

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