Cost accounting / Managerial accounting / Financial accounting / Accounting
The American Accounting Association (AAA) defines accounting as the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.
The term cost accounting (also called managerial accounting or management accounting) refers to preparing this information for those inside the entity. The practice of cost accountting (managerial accounting) may be concerned with
- Preparing capital and operating budgets, administering the budget process, and reporting (internally) performance against budgets.
- Evaluating the performance of managers and business units against other business plans and benchmarks
- Analyzing and reporting on financial problems and business situations.
In these capacities, managerial accountants (cost accountants) look both forwards and backwards in time.
The term financial accounting, by contrast, usually means providing information to those outside the entity (such as stockholders, regulatory organizations, and creditors). A primary focus in financial accounting is the preparation and publishing, quarterly and annually, of the income statement, balance sheet, statement of changes in financial position, and statement of retained earnings. In this regard, financial accounting primarily looks primarily backwards in time, reporting financial history.
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