Questions and Answers on Management accounting

Question # 1

What is the difference between financial accounting and management accounting?

• Financial accounting is the legal and regulatory requirement, whereas management accounting is based on the sole discretion of management.
• Financial accounting is done in accordance with the generally accepted principles or international accounting standards. In contrast, management accounting does not need to be adhered to these principles.
• Financial accounting is concerned with historical data whereas management accounting is related to future decision making.
• Financial accounts are prepared monthly, quarterly, semi annually or annually. On the other hand, management reports may be prepared on daily basis depending on the needs of the company.

Question # 2

What is meant by cost object?

A cost object is any activity for which a separate measurement of costs is desired.(Collin drury). A cost object is generally a separated activity for which a cost is computed. Examples include cost of operating a particular unit and cost rendering services to a particular customer. You can grasp this concept by thinking cost object.