|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.|