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Understanding the Difference between Cost Accounting and Management Accounting

Numerous different aspects and types of accounting must be considered by organizations for accurate and comprehensive auditing. Accounting firms in Malaysia provide a variety of accounting services dependent on the type of organization and requirements.


The two main types of accounting are cost accounting and management accounting. While these terms may seem similar to many people, there are stark differences in them.

What is Cost Accounting?

Cost accounting is a type of accounting that aims at producing information to regulate an organization’s operations for maximum profits and efficiency. It is also known as control accounting. In a cost accounting system, cost books are produced from the data obtained from financial accounting at the end of an accounting period.

What is Management Accounting?

On the other hand, management accounting is a branch of accounting that helps management in planning and decision-making. It is also called decision accounting. Data from both cost accounting and financial accounting is collected for management accounting. The obtained data is analyzed and interpreted to prepare reports and provide essential information to companies.

Both of these types of accounting are an essential part of accounting. They are necessary to be able to run an organization smoothly and efficiently. The data obtained from these accounting systems is used to analyze the overall financial health of an enterprise and make smart future decisions and policies.
financial inspector and secretary making report

Differences Between Cost Accounting and Management Accounting

The key differences between management accounting and cost-accounting are:

1. Data Handling

Cost accounting is associated with the recording and analysis of cost data. Management accounting is used by the management of a company to produce information for better management.

2. Results

Qualitative information is obtained as a result of cost accounting. On the other hand, management accounting gives both qualitative and quantitative data.

3. Sub-Type

Cost accounting is an essential part of management accounting. In Malaysia, when an accounting firm is hired by a large organization, it will conduct both cost accounting and management accounting to give complete information to the organizations.

4. Aims and Objectives

Cost accounting’s main goal is to determine the cost of producing a product and calculate profits. It is done to make a short-term strategy. On the other hand, management accounting’s primary objective is to obtain information for management to set goals and future working procedures. It is performed to create a long-term management strategy.

5. Rules and Procedures

There are specific rules, procedures, formulas and guidelines that must be followed while doing cost accounting, while there are no specific set of rules for management accounting. Every firm conducts management accounting according to its own rules, working conditions and requirements.

6. Scope

Cost accounting’s scope is restricted to cost data. It usually involves cost computation, cost control and cost reduction for maximum profits. Management accounting, however, is a broad type of accounting that covers areas like budgeting, taxation, planning, decision making, risk management, making strategies and the analysis of future trends.

7. Impact of Cost

Cost accounting deals with the majority of aspects of cost, such as allocation, distribution and thorough auditing. Management accounting studies the impact of cost on management operations.

8. Planning

Short-term planning is focused on cost accounting, but management accounting deals with both short- and long-term planning. High-level tools and techniques, such as probability structure and data sensitivity analysis, are used in management planning for accurate planning.

9. Prerequisite

It is not possible to perform management accounting without cost accounting. However, cost accounting is independent of any other type of accounting and can be performed without any prerequisites.

10. Future Decisions

Cost accounting provides the information necessary to make a future cost-related decision from evidence-based historical cost data. On the other hand, historical and predictive data is used for future decision making in management accounting.
working in cardboard manufactory

In a Nutshell

Management and cost accounting systems play a critical role in the internal management of a company. Cost accounting has a quantitative approach, while management accounting is focused on both quantitative and qualitative data.

Cost accounting helps minimize any extra expenses, and management accounting is necessary for strategy formulation and setting goals.

In short, it could be said that cost management is a management accounting sub-type because it is not possible to conduct management accounting without the collection and analysis of cost-related information.

To maximize profits and make smart future decisions, it’s essential for large organizations to manage their finances efficiently through an experienced accounting firm in Malaysia.

For more information, feel free to get in touch with us.