Cost and Financial Accounting are necessary parts of how a company handles its money. They each have different jobs and are used by other people. Cost Accounting means trying to find out how much is needed to spend on particular things. Financial Accounting helps to track all the records of money-related activities in a company. It clearly shows all the expenses also. So, the difference between cost accounting and financial accounting helps with figuring out the costs of making things and keeps track of all the money-related activities in the company.
Difference between Cost Accounting and Financial Accounting
Below, we listed out few of the difference between cost accounting and financial accounting;
| Parameter | Cost Accounting | Financial Accounting |
| Types of Cost Recorded | Historical and predetermined costs | Historical costs |
| Information | Production-related information | Financial information |
| Purpose | Controlling and reducing costs | Maintaining accounting records related to financial transactions |
| Confidentiality | Private | Public |
| Stock value | Estimated at cost | Estimated at cost / Net Realizable Value |
| Forecast possibility | Possible through budgeting | Not Possible |
| Profit Measurement | Focuses on the profitability of a product or service | Focuses on the overall profitability of the firm |
| Benefits | Identifying areas with extra expenditure and losses | For comparing business outcomes, financial evidence |
These are considered as some of the difference between cost accounting and financial accounting.
Objectives of Cost Accounting
Here are the main goals of cost accounting explained:
- Cost accounting helps determine how much it costs to make one thing.
- It reports all the costs of making things.
- It helps find where the company wastes materials, time, or money.
- It gives essential info about how much it costs to make things.
- Cost accounting helps the company determine which products make the most profit and how to make even more money.
Objectives of Financial Accounting
Here are the main goals of financial accounting explained:
- Financial accounting maintains all the records of a company’s amount spent.
- These records clearly show how much the company spent money and how much does the company have.
- It helps to know about the profit and loss of the company.
- It also helps to make some plans for the company.
Advantages of Cost Accounting
Cost accounting is all about determining how a company can make the most money and use its funds wisely. Here are some ways it helps:
- Sorting Expenses helps determine which parts of the business are making money and which need more help.
- Finding Problems: It helps spot problems in the company and suggests ways to fix them.
- Watching Trends: It keeps an eye on how costs change over time.
- Calculating Costs: It helps figure out how much different activities will cost. For example, if a company wants to add a second shift, cost accounting can help calculate the extra costs.
- Understanding Capacity: Cost accounting helps to understand the company’s regular fund.
Advantages of Financial Accounting
Financial statements have five main parts that includes revenues, expenses, equity, assets, and liabilities. Here are some excellent things about financial accounting:
- Keeping Track: It helps keep records of all the company’s transactions organized.
- Making Reports: It helps accountants make reports that show how well the company is doing financially.
- Checking Progress: Financial statements show how much money the company made, which helps compare to previous years.
- Legal Help: Sometimes, these statements can be used as proof in legal cases.
- Getting Loans: Financial accounting makes companies borrow money from the bank.
Overall, the difference between cost accounting and financial accounting lies in the finance department. To learn accounting, consider joining the accounting professional courses offered by Finprov Learning. We provide various accounting courses online, such as CBAT, PGBAT, Income Tax, Practical Accounting Training, PGDIFA and DIA, GST, SAP FICO, Tally Prime, MS Excel, and more. Whether you are a recent graduate or an experienced professional, our courses are designed to provide a comprehensive learning experience.
We offer live sessions and placement assistance to help you start your career once you complete the courses. Reach out to Finprov today to learn more about our accounting courses and enhance your career prospects for a bright future.
