COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It is used only by manufacturers.
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The distinction between management accounting and cost accounting is clear-cut.
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It is a subset of management accounting and therefore its information is used only to meet the needs of managers.
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It is part of both management and financial accounting systems.
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Detailed explanation-1: -Cost accounting is a subset of both financial and management accounting. Accurate product costs must be determined according to GAAP for external reporting purposes and according to decision relevancy for internal purposes.
Detailed explanation-2: -(i) Both cost accounts and financial accounts are maintained using the double entry system of accounting. (ii) Recording of transactions, both under the cost accounting system and financial accounting system, is made on the basis of common vouchers, invoices, and documents.
Detailed explanation-3: -Which of the following is true of cost accounting? It is part of both management and financial accounting systems.
Detailed explanation-4: -The answer is letter D. Managerial accounting need not follow GAAP while Financial accounting shoud follow GAAP. D represents the correct answer i.e. Managerial accounting does not has to be based on international or local accounting standards while Financial accounting shoud follow GAAP or IFRS.