Question

Cost accounting is often referred to as "managerial accounting". Why do you think this is so? Discuss the ways that a company uses cost accounting, and how it uses financial information for the purposes of cost accounting. Discuss the differences between the reports prepared for managerial accounting and those prepared for financial accounting.

Answer 1

The cost accounting is often referred to as Managerial Accounting because the use of various concept and outcome of cost accounting are being used by Management to take various decisions. The costing accounting has been used for following purposes:

1) The draw out the costing of a product and determination of the selling price of that product.

2) To decide on the benefits of various sales mix and adopting the best one.

3) To decide on the least price while applying for a contract.

4) To decide on the evaluation and adoption of a project.

5) To decide on the addition and dropping of a product line.

6) To decide on the acceptance of any special order through cost-benefit evaluation.

7) To evaluate and report on the results presented by the financial accounting and operation achievements.

The financial Accounting information are described under the various statements presented to the public domain and the internal records which are secret and not disclosed to outsiders. The Cost Accounting uses these financial informations to evaluate the cost-benefits analysis of various situations and present the decisions.

The difference between the reports prepared for Managerial accounting and financial accounting are:

Difference point	Financial Accounting	Managerial Accounting
Type	Accounting	Costing
Presentation	Chronological	Analytical
Report to	Shareholders	Management
Legality	Legaly required	Not required
Purpose	To access profit	To decide various situation
Sequence	First prepared	Uses the financial results