There are a lot of differences in both types of accounting. Read ahead to find out.
Cost Accounting is the branch of accounting which deals with costs incurred in the production of units of an organization. On the contrary, Financial Accounting refers to the accounting concerned with recording financial data of an organization, in order to exhibit exact position of the business.
1. Cost accounting involves the recording of all such transactions related to Material, Overhead and Labor, which are consumed in the process of production. Level of detailing is very high in Cost Accounting, Like there is specific costs calculated for every type of product manufactured in the organization, in order to take accurate decisions.
On the other hand, Financial Accounting records all such information and transactions which can be expressed in monetary terms. It reflects the overall financial position of the entire business entity.
2. In Cost Accounting, reporting is done as per the requirement or need of the management, there's no specific deadline or timeline. Whereas in Financial Accounting, reporting is generally done at the end of the financial year.
3. In Cost Accounting, stock of a business is valued at original cost, whereas in Financial Accounting, stock's valuation is done at cost or Net Realizable Value(NRV), whichever is less.
4. Cost Records are of use only to the internal management of the organization, which include Directors, Managers and employees. On the contrary, Financial records are used by both internal as well as external stakeholders like Shareholders, Customers and Creditors. Moreover, it is highly used by investors and credit rating agencies.
5. It is not compulsory to prepare Cost Records for every organization, but it is necessary to prepare Financial Accounts for every registered organization.
6. At the last, Cost Sheet is presented to view the details of cost incurred, profits and selling price, in Cost Accounting.
In Financial Accounting, Financial Statements are presented after each financial year, which depicts the summary of profits and losses, and the overview of the business entity in the form of Balance Sheet.