Distinction &

Relationship Between
Management Accounting V/s
Financial Accounting V/s
Cost Accounting

Prepared by
CA Sanjay Katira

Management
Management Accounting is that part of accounting system
Accounting
which facilitates the management process of decision making.
According to Robert Anthony Management Accounting is
concerned with accounting information which is useful to
management.
Management Accounting includes the following activities : Assist Management Functions at all Levels.
Help in the day to day running of the business.
Promote efficiency in business operations.
Provide the Management with accounting, costing and other
statistical data for use in the process of planning.
Help to ascertain the impact on profit of different courses of
action.
Help to measure and report on the effectiveness of undertaking
and methods used in attaining the objectives of the business.

Management

The Four Main Objectives of Management Accounting

Accounting
i.

are :-

Providing Managers with Information for decision making and

planning.
ii. Assisting Managers in directing and controlling operations.
iii. Motivating Managers towards the Organization's Goals.
iv. Measuring the performance of Managers and sub-units within the
Organization.

. Nature and Scope of Management Accounting

. Financial Accounting :- This pertains to recording of all

business transactions in the Books of Accounts and Preparation

of Profit & Loss A/c and Balance Sheet. This in turn, forms the
basis for analysis and interpretation for providing meaningful
data to the users of accounting information.

. Cost Accounting :- It refers to the classification, recording

and allocation of expenditures for the determination of the cost

of products or services and ensuring management control over
the same. It provides information to users internal to the firm
i.e. various levels of Management.

Management
Financial Management :- Raising and use of finance,
Accounting
safeguarding assets and optimizing the use of resources are

important to the survival and growth of a business enterprise. It

is in this context that Management Accounting is related to
financial Management.

Statistical Data :- It is concerned with the supply of

necessary statistical data and information by various

departments of the business firm. This includes statistical
compilation of case studies, engineering records, minutes of
meetings , special surveys and other business documents.

Electronic Data Processing :- Management Accounting

utilizes the facility of computers in its accounting.

Quantitative Techniques :- Of Late, the use of quantitative

techniques such as operations research, linear programming, game

theory in area of managerial decision-making has increased
considerably.

Taxation :- It requires computation of profits in accordance

with the provisions of the Income Tax Act and also prompt
filing of returns periodically and payment of taxes.

Internal Control and Internal Audit(IC&IA):- Management

Accountant depends heavily on IC & IA for smooth operations.

Management Accounting V/s

Financial Accounting
Financial
Accounting

Managerial
Accounting

1. Objective

Financial Accounting has

the primary objective of
providing information to
parties outside the
business, that is to
shareholders, bankers,
creditors, Government
Agencies and the General
Public.

Management Accounting is
concerned with accounting
information that is useful
to Management.

2. GAAP V/s
Flexibility

Financial Accounting must

be prepared in accordance
with the Generally
Accepted Accounting
Principles as they provide
consistency and
comparability.

The rules of Management

Accounting are tailored to
meet the needs of
management of a specific
business.

Financial Accounts are to

be kept according to the

Management Accounting is
entirely optional.

3. Legal

Management Accounting V/s

Financial Accounting
Financial
Accounting

4. Total V/s
Segments

5. Accuracy

6. Frequency

Managerial
Accounting

Financial Accounting is
primarily concerned with
reporting on business
activities of a company as
a whole. The Balance
Sheet and Profit & Loss
A/c relate to the business
as a whole.

Most Management
Accounting information
relates to segments of the
organization, that is,
departments, divisions,
products or to individual
functions.

Audited Financial
Statements have to be
precise.

Management needs
information rapidly and is
often willing to sacrifice
some accuracy in
information to timeliness
of information.

Financial Accounts are

generally published
annually.

The Information provided

by management
accounting is continuous
so that Management can

Management Accounting V/s

Financial Accounting
Financial
Accounting

7. Use of
Other
disciplines

Financial Accounting is
bound by conventional
accounting systems and
practices.

Managerial
Accounting

Management Accounting
makes use of information
that is drawn from
financial accounting and
may extend beyond the
boundaries of accounting
to draw upon economics,
finance, statistics,
operations research and
organizational behaviour.

Management Accounting V/s

Cost Accounting
Cost Accounting

1. Objective

2. Focus

Managerial
Accounting

The objective of Cost

Accounting is cost
ascertainment, cost
analysis and cost control.

The Objective of
Management Accounting is
to provide information for
Managerial Decision
Making.

The Main Focus of Cost

Accounting is on Cost
Control and Cost
Reduction. It helps in cost
control by keeping costs
within budgeted and
standard limits. It helps in
reducing cost by
eliminating various types
of wastes and
inefficiencies in the use of
material, labour and plant
facilities.

The Main Focus of

Management Accounting is
to help the management in
decision-making. Decisionmaking involves the
selection of optimal
alternative among a set of
alternatives.
Management Accounting
helps in the evaluation of
alternatives.

Management Accounting V/s

Cost Accounting

3. Use of
Financial
Accounting

4. Scope

Cost
Accounting

Managerial
Accounting

Cost Accounting does not

use financial accounting
techniques.

Management Accounting
does use some financial
accounting techniques
such as ratio analysis,
Fund Flow analysis etc..

Cost Accounting has a

limited scope. It does not
include financial
accounting, tax planning
etc.

Management Accounting
has a wide scope. It
includes Financial
Accounting, Cost
Accounting, Financial
Management, Tax
Planning, Quantitative
Techniques etc