An Interface Between Financial Accounting and Cost & Management Accounting and Some Concepts of Strategic Cost Management

Topics: Management accounting, Cost accounting, Costs Pages: 7 (1936 words) Published: March 9, 2009
The basic objective of accounting is to provide information that is useful in making business and economic decisions. What makes accounting information useful for decision-making? The answer is however the accounting information confirms to the qualities that should be possessed by the financial and cost & Managerial reporting. In view and addition to this, the importance of strategic cost management and costing techniques like Activity based costing should not be underestimated. This implies that organization should be installing appropriate framework of strategic cost management to reduce its costs in key areas on which the success of organization is heavily dependent.

Objective of the study:
The Project is presented with the following objectives:
1. To understand the various interfaces between financial accounting and Cost & management accounting 2. To understand the concept & significance of Strategic Management Programme. 3. To understand the basic idea and concepts of managerial accounting.

Main branches of accounting:
○ Financial Accounting
Financial accounting is relating to record all financial activity. These activities are related to business. Because of area of business is increasing day by day so the area of financial accounting is also increasing. Every day a new type of business is started. So daily accountant invents a new journal entry. Accountant will take the help of financial accounting with new thinking of result. So a new chapter of financial accounting is included by us. ○ Cost Accounting

If you want to increase your profit, then start to decrease your cost. What a dialogue, this is not a dialogue but this is the reality of today business. Every day an accountant invents new method of decreasing the cost. All method of calculation of FIFO, LIFO, standard costing, variance calculation and making of cost budget is not the end of cost accounting but this is the starting of cost accounting. Internet cost reduction method is also a new mile stone in this direction. ○ Management Accounting

One new manager will do work in the field of management accounting. He will utilize accounting information in new way. This is the real definition of management accounting. How to use accounting data and accounting education in the field of management so that we will carry our business at international level. Ratio analysis , fund flow statements, cash flow statements , working capital management , capital budgeting , cost of capital calculation is just starting in this point.

Differences between Financial and Cost & management Accounting: The differences between Financial and Cost & management accounting are discussed below under respective heads:

1. Definition:
Financial Accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for the benefit of people outside the organization. It is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. The terminology of Cost Accounting published by the Institute of Cost and Management Accountants of England defines Cost Accounting as “the process of accounting for cost which begins with recording of income and expenditure or the bases on which they are calculated and ends with the preparation of periodical statements and reports for ascertaining and controlling costs”

2. Purpose:
✓ Financial accounting serves following purposes:
The fundamental need for Financial accounting is to reduce principal-agent problem by measuring and monitoring agents' performance and reporting the results to interested users. Provision of information used by management of a business entity for decision making, planning and performance evaluation for meeting regulatory requirements. Financial accounting...

References: 1.
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