1.

18 COST ACCOUNTING

Distinction between Financial Accounting and CoRs

Accounting

Basis Financial Accounting Cost Accounting

Toascertain profit or loss and To provide information to
1.Objective financial position of the the management for
business. proper planning, control
and decision making
relating to costs.
2. Scope It covers both operating and It covers only operating
non-operating activities. activities.

3. Unit of Only transactions which can |Along with money value,

non-monetary units like
Measurement be measured in monetary
terms are recorded.
No of Units/ Hours etc.
are also recorded.

4. Format of reports Reports are prepared in Formáts of Cost Audit

of registered accordance with the formats report are provided under
Companies provided in Schedule ll ofrespective Cost Records
and Audit 2019.
Companies Act , 2013.
Reports are meant only
5. User groups Reports are prepared mainly for use by internal
for external users for their management for proper
decision making. ThÍse planning control and|
reports are published. decision making. These
reports are not published.

6. Control It is used only for recording It uses techniques for

data and provides reports controlling costs like
without attaching any inventory control,
budgetary control and
importance to control. standard costing etc.
7. Periodicity of Financial statements are Cost Accounting is
reporting prepared normally at the end| prepared for management
of the financial year. depending upon their
requirements i.e. hourty.
daily, weekly, monthly.
quarterly or on a yearly
basis.
 INTRODUCTION 1.19

Basis Financial Accounting Cost Accounting

8. Unit of study Financial Accounting regards Under Cost Accounting a
the overall entity as a unit of comprehensive analysis is
study i.e. it follows a macrol done for various segments
approach. of the organisation such
as product wise,
department wise, function
wise, prOcess wise etc. It
followsa micro approach.

9. Classification Classification of revenue and| While preparing cost

of revenue and expenses are done as per sheet, clear and distinct
expenses the guidelines provided in classification of various
Schedule of the types of costs is done
Companies Act, 2013. under some rational basis.

10. Statutory Financial accounting is It is voluntary except in

requirements obligatory under Companies case of certain industries
Act and Income Tax Act. where it is mandatory to
maintain cost acCOunts
under Companies Act.
recorded on a
Costs are recorded on anl Costs are
11. Types of aggregate basisin financiall unit basis in cost
costs accounts.
accounts.

on historical
12. Basis of It is based on historical costs. It is based
Preparation costs as well as on pre
determined estimated
COsts.
at cost
13. Valuation of Stock is valued At Cost orl Stock is valued
Net Realisable Value, price.
stock
whichever is lower.
14.Information on Efficiencies of workers/Plant Cost Accounts provide
& Machinery etc. cannot be information on the
Efficiency efficiencies of workers,
reflected in Financiall
Plant & Machinery,
Accounting.
product lines or divisions.