Question

Cost accounting is often referred to as "managerial accounting". Why do you think this is so? Discuss the ways that a company uses cost accounting, and how it uses financial information for the purposes of cost accounting. Discuss the differences between the reports prepared for managerial accounting and those prepared for financial accounting

Answer 1

The concepts of cost accounting and managerial accounting often overlap as the work done by cost accountants can be often used for managerial decision making. The managerial accounting is nothing but identifying and analyzing the cost and provide insights using that information for managers to take decisions for the growth of company. Cost accounting is used for knowing about how the total cost is made up of for any products it manufactures like direct costs, indirect costs, fixed costs, variables costs etc. The main purpose of cost accounting is to understand costs and control them where as the financial accounting is to keep record of all financial data and store it and prepare as per US GAAP or IFRS. It is used mainly by external stakeholders like lenders, customers, investors to know how company is performing. The reports prepared for managerial accounting is used by internal stakeholders like employees, managers to make effective decisions on how to run the company where as reports prepared for financial accounting like Balance sheet, income statement is used by outsiders to analyze the company performance