What is the Difference Between Cost and Management Accounting?

Cost Accounting Vs Management Accounting

The difference between cost and management accounting is very important to understand as both of them serve different purposes and different audiences.

A person from the cost accounting team may not find a piece of information relevant, but a management accountant may not be able to work without it. A cost accountant and a manager would need different sets of information from the accounting records of a business.

Cost Accounting

It is the branch of accounting which is mainly concerned with “Cost aspect of accounting”. Cost accounting intends to capture and competently manage a company’s costs of production by examining and evaluating various alternative courses of action.

• The main goal of cost accounting is to find out the cost of production or services rendered and use this information to evaluate the profitability and efficiency of business operations. The most appropriate course of action is sought based on ability and cost-efficiency.

• It considers both past and present numbers in the process of evaluation.

• Example: Let’s assume that an FMCG company has decided to introduce a new product in their range, they will need cost accounting information, such as the cost of production per unit, to price the product correctly in the market.

Management Accounting

• It helps in effective performance management, control, planning, decision-making, etc. It generally includes budgeting decisions as well. Since management accounting is not a legal requirement, it is not based on Generally Accepted Accounting Principles and accounting standards.

• It is the branch of accounting, which is mainly concerned with “Internal users of information”, commonly –  the managers. Management accounting provides a basis to the internal users to make a logical and informed decision.

• It focuses mainly on the future and concerned with future projections.

• Example: Let’s assume that a Sr. Manager wants to make an internal decision on an investment made in a particular business segment. It will need internal management accounting data such as the return on investment, etc.

The above mentioned are a few key points of difference between the cost accounting and the management accounting.

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