CAC-1

Definition of Cost Accounting

Keyword

The main and primary objective of accounting is to provide financial information about an
economic entity to different users. First we have the internal users - managers for planning,
controlling and decision making. Then we have external users, those who provide funds and
those who have various interests in the operation of the entity.
Cost accounting is an expanded phase of general or financial accounting which informs
management promptly with the cost of rendering a particular service, buying and selling a
product and producing a product. It is the field of accounting that measures, records, and
reports information about costs.
All types of business entities - manufacturing, merchandising and service businesses require
information systems which provide the necessary data.
Comparison of Financial, Managerial and Cost Accounting
Financial Accounting is the use of accounting information for reporting to external parties,
including investors and creditors.
Managerial Accounting focuses on the needs of parties within the organization, rather than the
interested parties outside the organization,
Cost Accounting is the intersection between financial and managerial accounting. Cost
accounting information is needed and used by both financial and managerial accounting.

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LESSON 2 USES OF ACCOUNTING