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Cost Accounting(15th Edition) Edit

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Step 1 of 3
Financial accounting: Under financial accounting, business transactions are measured
and reported in the form of financial statements. Generally accepted accounting
principles (GAAP) are followed while preparing the financial statements. The intended
users of the above financial statements are external users like investors, banks,
suppliers, and government agencies.
Financial Statements: The statement prepared for the specific period which comprises
the financial information of the organization. It includes a statement of income which
shows the profitability of the business, balance sheet which shows the financial situation
in the terms of assets, liabilities and capital, and cash flow statement which represents
the cash flows for the accounting period.
Step 2 of 3
Management accounting: Management accounting measures, analyzes, and reports
not only financial information but also non-financial information. Both financial and non-
financial information helps managers to take timely decisions to achieve the goals of an
organization. The above management accounting information helps not only in planning
the various activities of the organization but also in performance evaluation and taking
corrective actions when there is a deviation from the charted path.
Step 3 of 3
The differences between financial and management accounting systems is
summarized as follows:
Objective of the organization:
• The primary objective of management accounting is to help the managers of an
organization to allocate the resources efficiently whereas the objective of financial
accounting is to help the external users to allocate resources at their disposal.
Primary Users:
• The primary users of management accounting are managers of the organization itself
and whereas the primary users of financial accounting are external users like investors,
banks, regulators, and other who are external to the organization.
Focus and emphasis:
• Management accounting focuses and emphasizes on future oriented activities like
budgets etc. While the financial accounting focuses on the past performance of the
organization.
Rules of Measurement and Reporting:
• The preparers of the management accounting reports have no obligation to follow
GAAP but mainly driven by the cost-benefit analysis. The financial accounting reports
(Financial Statements) are prepared strictly in accordance with generally accepted
accounting principles (GAAP) and these statements are certified by external and
independent auditors.
Type of Reports and Time span:
• The time span of the management reports vary from hourly information to yearly plans
ranging up to 15 to 20 years. These reports consist of both financial and non-financial
data information and can be prepared product, department, territories and strategies
wise.
The time frame for financial reports may range from the quarterly to annual reports and
primarily prepared on the company as a whole.
Behavioral Implications:
• Management accounting reports influence the behavior of the managers and other
employees of the organization. The financial accounting not only reports the economic
events but also influences the behavior as the managers’ compensation is often
determined by the reported financial results.
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Corresponding textbook
Cost Accounting | 15th Edition
ISBN-13:9780133428704ISBN:0133428704Authors:Madhav V. Rajan,Srikant M.
Datar,Charles T. HorngrenRent | Buy
This is an alternate ISBN. View the primary ISBN for: Cost Accounting 15th Edition
Textbook Solutions
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 Chapter 7
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 Chapter 9
 Chapter 10
 Chapter 11
 Chapter 12
 Chapter 13
 Chapter 14
 Chapter 15
 Chapter 16
 Chapter 17
 Chapter 18
 Chapter 19
  Chapter 20
 Chapter 21
 Chapter 22
 Chapter 23
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