Differentiate between cost accounting and financial accounting.

The major differences between cost accounting and financial accounting are as follows −

Cost accounting

  • Records information related to production activities.

  • Records both historical and forecasted costs.

  • Main objective is fix selling price of the product by calculating per unit cost.

  • Both monetary and non-monetary transactions are recorded.

  • Prepared whenever is necessary.

  • Not necessary to prepare any statements for public.

  • No specific format.

  • Forecasted using budgeting technique.

  • Stock is valued at cost.

Financial accounting

  • Records information which are financial in nature.

  • Records only historical cost.

  • Main objective is to assess the profitability and financial position.

  • Only monetary transactions are recorded.

  • Prepared at the end of accounting period.

  • Public companies prepared as a part of financial accounting.

  • Not possible to forecast financial accounting.

  • GAAP and IFRS principles are used.

  • Stock is valued at market price or cost, whichever is less.