Cost accounting helps in determining the production cost of a unit. This data helps track operations' information to maximise the efficiency and revenue generated. Financial accounting is different from cost accounting. Financial accounting means tracking all the money going in and out of an organisation.
Let’s distinguish between cost accounting and financial accounting. Financial accounting records the financial transactions that help determine a company's profitability. It recognises the financial amounts for different accounting periods. Also, financial accounting recognises the stance of liabilities and assets on the final day of the period.
Did you know? The first name recorded in the history of accounting was Kushim. He was an accountant and used to record transactions of Barley in the Uruk period, which lasted from 4000 BC to 3100 BC.
Cost Accounting vs Financial Accounting
Cost and financial accounting assist the administration in formulating and supervising organisational strategies.
Financial management provides an overall view of profit and loss. Cost accounting, on the other hand, gives detailed product-wise calculations. There is no doubt that the purposes of both are the same.
Also read: All Facts and Figures About the Nominal Account in Accounting
However, there are a lot of differences between cost accounting and financial accounting. Suppose a business handles ten different services and products. In that case, financial accounting gives data of all services and products under various categories of expense heads. It’s used in preparing the overall company’s financial reports.
On the other hand, cost accounting provides details of all production overhead costs, like material, labour, and indirect and direct expenditures used in every product. With costing, we obtain product-wise profitability, cost and selling price.
Conclusion
Both financial and cost accounting documents assist the company in developing strategies. Both kinds of strategies are components of the double-entry system and complete each other. Cost accounting data helps the company make cost control judgements. However, there is no comparability. Financial accounting data is analogous but needs relevant data for future forecasting. Therefore, both cost and financial accounting are important and incomplete without each other.