What is Cost Accounting and Financial Accounting? (Definition)

The accounting includes Financial accounting and Cost accounting. Here are definitions plus some purposes of Cost and Financial Accounting...

Cost Accounting

Cost accounting is the study and analysis of the cost needed to produce a product or to render a service. Cost accounting communicates its costing data for internal consumption mainly to various levels of management. It provides emphasis on cost estimation and cost determination of product of services. Cost accounting also records both monetary transactions of the past and projected cost figures of the future. It provides a system to maintain control over materials, labor, and overhead costs with the help of standard costing and capital budgeting. In general, cost accounting reports should be prepared and presented to the concerned authority when demanded.

Purposes or Objectives of Cost accounting

To estimate the cost of the product.
It helps to determine the selling price.
Helps in planning and control of cost.
Determining the value of the stock.
Helps in decision making
Assists to establish the standard of performance.

Financial Accounting

Financial accounting is the accounting that keeps records of monetary transactions, provides information on operational results and the overall financial position of the business. It records the monetary transactions which have already taken place in the past. Financial accounting is governed by the Companies Act, Income Tax Act, and other rules of the country. It provides emphasis, only to maintain a record of monetary transactions and does not assist to maintain control over business activities. Finally, financial accounting reports should be prepared and presented to related authorities at the end of the fiscal year.

Purposes or Objectives of Financial Accounting

To keep the records of financial transactions.
To evaluate the financial positions.
Assess the amount of income and assets.
To determine the profit and loss.
It provides useful information.

"Cost accounting is an ever-growing discipline of accounting."

"Financial Accounting is the primary part among accounting disciplines."

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