Difference between Cost Accounts and Financial Accounts
Objective
The main objective of cost accounting is to provide cost information to management for decision making. The main the objective of financial accounting is to prepare Profit and loss A/c and balance sheets to report to owner and outsiders.
Legal Requirement
Cost accounts ares maintained to fulfil the internal requirements of the management as per conventional guideline. Financial records are maintained as per the requirement of Companies Act and Income Tax Act.
Classification of Transactions
Cost Accounting records and analyses expenditure in an objective manner viz., according to purpose for which costs are incurred. Financial accounting classifies records and analyses transactions in a subjective manner i.e., according to nature expenses.
Stock Valuation
In cost accounts stocks are valued at cost. In financial accounts, stocks are valued at cost or realisable value, whichever is lesser.
Analysis of Profit and Cost
Cost accounts reveal Profit of Loss of different products departments separately. In financial accounts, Profit or Loss of the entire enterprise is disclosed
Accounting period
Cost report are continuous process and are prepared as per the requirements of managements, may be daily, weekly, monthly, quarterly, or annually. Financial reports are prepared annually.
Emphasis
Cost accounting lays emphasis on ascertainment of cost and cost control. Financial accounts emphasis is laid on the recording of transactions and control aspect is not given importance.
Nature
Cost accounts lay emphasis on historical and predetermined costs. Financial accounts are maintained on the basis of historical records.
