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| Winners of the accountancy awards 2008 at Birmingham City University (Photo credit: Birmingham City University) |
| 1) It involves the preparation of a set of final accounts for each accounting period in accordance with the accounting standards and company legislation. It gives the overall financial picture of a company. | 1) It is an internal management tool which provides appropriate timely information of management to help them for taking better decisions by applying the techniques viz; standard costing, budgetary control, marginal costing. |
| 2) It can not provide information for future period | 2) It can forecast for future period by the techniques of budgeting. |
| 3) It can not provide information for day to day decision making . | 3) It can provide day to day decision by applying the concepts of marginal costing , budgetary control etc. |
| 4) It can not provide information to assess the performance of various persons of the department to see that cost don not exceed the reasonable limit for a given quantum of work. | 4) The techniques of budgeting and standard costing enable the management to perform the function. |
Besides above, the following distinction between financial and cost accounting has been discussed –
| i) Purpose- To provide investors, creditor or other external parties with useful information about the financial position, financial performance and cash flow prospect of an enterprise. | i) To provide the manager with information useful for planning, evaluation and rewarding performance and sharing with other outside parties and to apportion decision making authority over the firm resources. |
| ii) Types of report- Primarily financial statements (profit & loss a/c and balance sheet and cash flow statement and related notes) provides investors, creditors and other users of information to support external decision making process. | ii) Many different types of report depending on the nature of business and the specific information needs of the management. Example; Budget financial projection, bench mark studies, activity based cost report and cost of quality assessment. |
| iii) Standards for presentation - It follows generally accepted accounting principles including those formally established in the authoritative accounting literature and standard industry practice. | iii) rules are set within the organization to produce information relevant to the needs of management. |
| i) Time Periods- Usually a year, quarter or month. Most report focus on completed periods. Emphasis is pl aced on the current period with prior periods often shown for comparison. | v) Any period- year, quarter , month,week,day even a work shift .Some reports are historical in nature. Other focus on estimates and results expected in the future period. |
| ii) User of information- Outsiders as well as managers . These outsiders includes shareholders, creditors, prospective investors, regulatory authorities and the general public. | vi) Management (Different reports to different managers), customers, auditors, suppliers and others involved in an organization value chain. |
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