It is essential to monitor both financial and non-financial transactions of a business to maintain profitability and enhance productivity. It ensures the overall progress and development of business operations and helps generate more revenue. However, for this, implementing effective ways of collecting and evaluating data about all the transactions of the business is crucial. This is where Cost Accounting and Management Accounting come to the rescue. So, let’s learn more about cost accounting meaning and management accounting meaning, and know the difference between Cost Accounting and Management Accounting.
What is Cost Accounting?
Cost Accounting is an accounting system that helps examine, summarise and record the costs included in the production of any product of a company. It focuses on cost computation, cost reduction and cost control. Mostly used in manufacturing units and factories, it is an accounting process that ensures cost-effectiveness by collecting, organising, recording, assessing and evaluating the overall costs incurred on a product, service, process or project of a company.
Cost accounting primarily aims to evaluate the cost of production and regulate the expenses. It helps an organisation monitor its costs and make a strategic plan for cost improvement.
Now that you understand the cost accounting definition, let’s learn about ‘what is management accounting?’.
What is Management Accounting?
Management Accounting is an accounting system that helps the management gather, evaluate and understand financial, qualitative and statistical information for making effective decisions about the business. Simply put, it involves providing information to the management of an organisation, helping them make informed decisions.
By using financial data, management accounting creates reports that are appropriate to the requirements of specific managers and departments within a company. These reports can contain cost analysis, budget forecasts, variance analysis and much more.
Though management accounting is different from cost accounting and financial accounting, it generates review reports for the management by collecting information from both. Additionally, cost accounting is a subdivision of management accounting.
Difference Between Cost Accounting and Management Accounting
Let’s find out the difference between cost accounting and management accounting in the table below:
| Parameters | Cost Accounting | Management Accounting |
| Definition | Cost accounting is an accounting process that helps calculate, control and lower costs. | Management accounting is an accounting method that analyses and simplifies financial and non-financial data to make effective decisions. |
| Application | It helps an organisation monitor and reduce costs. | It helps an organisation prepare an effective management plan by providing information. |
| Objective | Its main objective is to determine the cost of production so that it does not exceed the budget. | Its main objective is to provide information to the management so that they can make informed decisions and prepare strategies. |
| Dependency | It can be implemented without management accounting. | It depends on the cost accounting and financial accounting. |
| Users | Vendors, stakeholders and management of an organisation can use the cost accounting method. | Only the management of an organisation can use the management accounting process. |
| Scope | The scope of cost accounting is narrow. | The scope of management accounting is relatively broad. |
| Data Recording | Cost accounting compiles both past and present data. | Management accounting mostly focuses on the future projections. |
| Planning | Cost accounting is ideal for short-time planning | Management accounting is suitable for both short-term and long-term planning. |
Final Words
In conclusion, it is essential to understand the ‘difference between cost accounting and management accounting’ for individuals who want to make a career in accounting and financial management. By understanding the unique contributions of cost accounting and management accounting, individuals can successfully utilise these concepts to navigate financial success and enhance the overall performance of an organisation.
Want to learn management accounting? Then, enrol in the Certified Management Accountant (CMA), administered by the Institute for Management Accountants (IMA), USA in collaboration with Imarticus Learning. This US CMA course is an advanced-level qualification suitable for accountants and financial professionals. Covering accounting, business, finance and analytics, this US CMA certification course helps students learn 12 main skills that are widely required to lead the world of accounting and finance.
