Relationship among Financial Accounting and Cost Accounting
The difference among management and cost accounting may be highlighted by using a number of questions namely as;
a) Are there any unifying concepts to those enterprises will adhere?
Here for financial accounting the answer is "YES". A number of accounting there that is standards such are followed in producing accounting information. These are actions established via the accounting profession to standardize and improve accounting disclosure and methods. For example, the International Accounting Standard No. 1 once out for mention fundamental accounting concepts namely going to relate, consistency and accruals. Here for management accounting and cost accounting the answer is NO. Conversely, there are a number of techniques that are widely used as like an example budgeting, marginal costing, standard costing, and cost-volume-profit analysis.
b) May management decide whether or not to employ the discipline?
The Companies Act needs a number of accounting records that by statute should be kept and made available. Now for a limited company, financial statements should be produced that in the opinion of the auditors, give a true and fair view of the company's affairs and comply along with the Companies Act, Cap 486, 1962. During the case of cost and management accounting, the management of an enterprise may decide whether or not to make a cost and management accounting department and the extent to that any department will be employed.
c) To what extent of the enterprise is focus on segments?
In financial accounting, the major emphasis is on the performance of the business entity. The balance sheet is viewing the state of the business at an exact point in time expressed in monetary terms. The loss and profit account is comparing the revenue and expenses of the business for an exact period. Management and cost accounting will focus analysis via segments of the business in order to permit examination via job, product or process or service.
d) To what extent does the analysis of information incorporate non-monetary measures?
In financial accounting the monetary base is pre-dominant. Non-monetary measures are employed in the interpretation of accounting statements. As an example state: expressing net profit like a percentage of sales revenue.
In cost and management accounting there will be greater employ of non monetary measures. Quantitative information may be helpful in areas as like material losses like kilos or as a percentage input, machine efficiency like a percentage of a predetermined standard.
e) To what extent is the emphasis upon future trends?
Accounting there is the statutory requirement in financial for provision of historical data from that accounting statements may be ready. Such statements may be employed in the forecasting of future trends for employ by potential investors or investment analysts Management and cost accounting will tend to focus more on the future though analysis of historical information will be employed. As an example shows: budgeting will focus on future plans however to some extent will employ past performance like a guide to the structure of that plans
f) What Degree of accuracy is needed in the information analysis?
Basic financial accounting records should record transactions including cash to the nearest cent. However there will be an element of judgment in areas as like provision for depreciation of fixed assets or valuation of debtors and stock.
Management and cost accounting information will tend to be like exact as required in a specified situation as like an example: Management Reports may summarize figures to the closest to thousand shilling whereas the labour cost per product may be expressed to four (4) decimal positions.
g) Is accounting a means to an end or an end in itself?
Financial accounting is an ending in itself in so far like it fulfills the statutory needs in relation to accounting records and the publication of financial accounting statements. It is a means to an end also in such it provides an overview of the business that may be interpreted via the various users of accounting information that the Companies Act seeks to protect. Management and Cost accounting is a means to an end. It may be employed to assist management in future planning, and decision, control making required for the efficient implementation of the objectives of the enterprise and the strategies that will best lead to achievement of these objects.