Accounting is a business language, which can be used to learn about financial transactions and their results. Cost accounting and Management accounting are the two terms used in accounting used to control and classify a company’s policies. They both have different styles and are used for different purposes. There are many best College of Commerce in India.
It aims to increase profitability by managing revenue and expenses. It also reports on long-term profit and growth strategies for managers. Not only does cost and management accounting help businesses determine the cost of products, projects and processes, but also shows where a company loses its earning and money. It’s also an integral part of the budget planning.
Cost accounting deals with the calculation and evaluation of the costs and costs of purchasing or producing a product. The whole purpose of this is to facilitate managers in decision making.
The main activities of cost accounting are:
- Various budgets are prepared in cost accounting. The budget is which can planned unique to every organization.
- Costs are calculated at a comprehensive level. Thus it is much easier to identify profitable and unprofitable products or functions.
- The basis for estimating future costs and information on costs and operations can be used in preparing and reviewing budget estimates.
- In the time of severe or sluggish market conditions, costing helps to determine the product’s selling price at the right level of competitiveness.
Management accounting is concerned with decision making, planning, cost control and more. This is much better than cost accounting. It identifies the causes of profit or loss and examines the factors that influence performance. So, cause and effect are an important aspect of management accounting.
Key activities of management accounting
- An important part of management accounting is to inform and advise on the current state of a company. It contains information on the performance of various departments of the administration. That way the management can make the right decision at the right time.
- A company can make accurate and effective decision for its success based on information provided by management accounting.
- A management accountant provides the information necessary and relevant for the company to achieve its goals. Thus, it is possible to planning and developing policies for the organization.
To summarize, cost accounting supports management accounting. In turn, management accounting pushes cost accounting to meet the needs of management. Because of this strong bond between cost accounting and management accounting, they are often seen as coexisting friends.