Surely, we all agree that the accounting of any company is one of the most relevant parts as well as mandatory to carry out the financial management of any business model.
Financial accounting offers generic information about the company referring to it in its entirety. It is also legally regulated and must be presented within the table of the National General Accounting Plan.
What is the objective of Financial Accounting?
Provide information about the situation of the company to third parties, that is, to individuals or legal entities outside the organization. Not only internal staff will have access to this data, but they will represent a real reflection on the outside.
Through this accounting, financial statements on the assets, financial situation, and results of the company will be shown.
The financial accounting will show the situation of the company at a certain point in time (it is usually December 31), that is, it is as if it were a photograph that freezes the figures of what has happened during that period of time.
It can be presented monthly, quarterly, or annually.
The fact that the presentation of information related to this accounting is not legally obligatory does not make it less important. It is a type of information reserved for internal users of the company, which will help in making future decisions relevant to the company.
What is the objective of management accounting?
Establish a registry of financial operations and report them to the company’s financial statements.
It has a triple objective:
- Know the costs of the company
- Be useful for decision making
- Facilitate control and planning
Its importance today is more than proven since it provides quantified information for analysis and cost control that could not be obtained in any other way.
This type of accounting will take into account information from certain previously defined time periods.
This means that it will be done based on the needs that the company has.
Cost accounting, also known as analytics, aims to create an information system that allows knowing the cost of production and goods and services.
What is the objective of cost accounting?
On the one hand:
Determine costs: What allows you to value assets and results.
And on the other:
It allows the planning and control of business management, drawing up budgets and preparing information that allows evaluating performance and thus taking the necessary measures.
All of this contributes to managing, planning, and making decisions within the company.
It is a type of accounting that is not regulated by law, that is, its presentation is not mandatory and is intended for internal use by the company.
Due to its relevance, it is something that is done continuously.
Now that we are clear about the types of accounting that exist within a company and what each one is for, let’s analyze their differences, common aspects and possible synergies.
DIFFERENCES & SIMILARITIES BETWEEN ACCOUNTING
As we see in the initial definitions, both the objectives and the users to whom they are addressed and the mandatory regulations are different in each case.
- Cost accounting is intended to calculate the cost of products, while financial accounting focuses on obtaining financial statements that reflect equity and results.
- Cost and management accounting are relevant sources of information for internal users of the company, while financial accounting is regulated by law and its presentation is mandatory.
- Financial accounting shows a picture of what is really happening and has happened in the company during a certain period, while cost and management prevent events that have not happened yet.
- Financial accounting shows exact data reflecting what has happened, while cost accounting presents approximate data since multiple variables influence the calculation of the cost of a product, so the final figure may be inaccurate.
- Financial accounting shows measurable data in each country’s currency, while cost accounting does not use standard units of measurement.
- Financial accounting shows generic information for the company as a whole, while cost accounting does so in a disaggregated manner based on what users require.
- Similarities & Synergies
- The management and cost accounting is aimed at informing the internal users of the company
- Cost accounting and management are focused on management, planning, and decision-making within the company.
- Management and cost-accounting are carried out by companies on a voluntary basis
- What happens to financial accounting?
- Management accounting, part of financial accounting as the main source (inventory costs, raw materials, generic company costs, etc.)
- Management accounting and financial accounting will be fed back respectively as both corroborate the reliability of your information
- It can be concluded then that management accounting is complementary to the information provided by financial accounting, therefore it contributes to verifying it.
By taking financial management, you will obtain professional certification from ECC “Egyptian Culture Center”
In this link, you can check the information related to the access requirements, the admission criteria, and tests, or the documentation you need to request access.
If you wish, you can also contact us to clarify doubts or expand some type of information