Question

Compare financial, managerial, and cost accounting. Choose a well-known company, and describe how managers of that company might use financial, managerial, and cost accounting information. Be specific. Do not choose a company that one of your classmates has already written about.

250-500 words

Answer 1

First start understanding the termnology of the followings:

Financial Accounting: As the name suggest financial it means recording of all financial and monetary transactions during the year and will impact the financial statment of the organisation.

Cost Accounting: It is the accounting which deal swith the budgeting for the financial year, analysing the expenditure, determining the cost of various product and product mix, cost control and decision making activity for the production and service sector or expansion or introduction of new line of business.

Managerial Accounting: This only deals with the assisting management in taking rational policy decision and analyse its impact of its decisionand action.

However above definition and difference among three can be better understood with the example of business scenario of the organsation dealing in White label / brown label ATMs.

White / Brown label ATMs: They are those ATM which are owned by the private organsation and handed over to the bank at Tier II, Tier III and Tier IV locations where accessibilty of banking operations specially in terms of ATM services is null or costing is very high in terms of its operations as well as security. In this kind of buisness private owners will get rental revenue from the banks they are tied up and networking of the bank is being installed in the white / brown label ATMS for operations.

1. Financial Accounting: Here the private owners of White / brown label ATM will have to book preventive maintenance cost , delay in other services, debit note charges, rental revenue, Electricity bill where ATMs are installed at any other premises not owned by the bank, salary of the employees, salary of the security guards and many more.

2. Cost Accounting: In this Private owners of White / brown ATMs need to prepare Annual operating plan for the sites / area / tier location need to be covered , rental need to be charged form the banks, preventive maintenace frequency during the year, penalty charges for non performance during the period. Deceison making Should deploy ATMs at  Tier V or Tier VI location, Deploy ATM with Nationalised or private bankers also. like this tpe of decision.

3. Managerial: As per this Management may put checklist for quarterly and monthly or half yeraly reporting of the activites related with Preventive maintenace happened during the year on every site. ATM governing body of the land adhered or not while operating the same. etc.

Taking further the above example Management uses the above financial data , managerial and cost accounting data for its decision making purpose

like: If the preventive maintenace recording is showing very high and as per cost accounting the major proportion of cost is that only and as per Checklist maintained for preventive maintenace is not covering all the sites it means Managemnt has to take decision over the preventive maintenace frequency accordingly which helps in maintaining the ATM sat tier locations, on an average all ATM should be covered durong the year, and other cost will be lower doen like , down time cost and penalty as charged by the banks for non performance of the ATMs.