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CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Which statement about the distinction between cost accounting and management accounting is correct?

Management accounting uses financial and cost information to support managerial decisions and is not bound by prescribed statutory formats. The other statements are wrong because cost accounting does support cost control and is not purely forward-looking.

  1. ACost accounting is concerned only with future projections, while management accounting records historical data
  2. BManagement accounting uses both financial and cost data to aid managerial decisions and is not bound by statutory formatsCorrect
  3. CManagement accounting must follow rules like Accounting Standards in the same way as statutory financial statements
  4. DCost accounting has no role in cost control and deals only with ascertainment of selling price

Explanation

Management accounting draws on financial accounting and cost accounting information and presents it flexibly for internal decision making, without any prescribed statutory format. The other options reverse the roles of cost and management accounting, or wrongly deny the control function of cost accounting.

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