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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 statement correctly contrasts financial accounting and cost accounting regarding the period and format of reporting?

Financial accounting follows a prescribed statutory format and reports for a fixed accounting year, whereas cost accounting reports have no mandatory format and can be prepared whenever management needs them, such as daily, weekly or monthly, to support control and decisions.

  1. AFinancial accounting follows a prescribed statutory format for a fixed accounting year, while cost reports can be prepared in any format and at any frequency management needsCorrect
  2. BCost accounting reports must be prepared only annually in a format prescribed by the Companies Act for all firms
  3. CFinancial accounting reports are prepared daily for internal control, while cost reports are annual
  4. DBoth follow identical statutory formats and the same reporting period

Explanation

Financial statements follow a prescribed format for a yearly period and are mostly historical. Cost statements are flexible, can be daily, weekly or monthly, and suit managerial needs. The other options reverse or equate these features.

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