Management vs. Cost Accounting: The Definitive Guide
There are various kinds of accounting and while all arent used in an organization, the two major types of accounting that are crucial to a business are management accounting and cost accounting.
While the internal management of the organization use the information generated by the two kinds of accounting, it’s essential to know the differences between the two. The most simplistic approach to this is that cost accounting is a quantitative approach, while management accounting is an amalgamation of quantitative as well as qualitative accounting. Here are some aspects that differ between cost accounting and management accounting:
Purpose of cost accounting
Cost accounting records financial information of the organization. It is recorded in a way to assist management in controlling costs as well as reducing them, to promote efficiency within the organization.
Purpose of management accounting
Management accounting, on the other hand, helps a company with policy making. Based on the management accounting results, the company can work towards choosing the right kind of costing model, pricing of products, etc.
Cost accounting is a micro perspective of the company, since its goal is to reduce costs and prevent the company from operating beyond the budget. One of the main applications of cost accounting is to determine the best price for a manufacturer where the costs are kept to a minimum to increase profit.
Management accounting, on the other hand deals with the bigger picture. It’s helps upper management of a firm strategize to promote growth. The scope of management accounting is therefore considered to be broader.
Basis of decision making