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Cost management is the process of planning and controlling the budget of a business.

Cost management is a form of management accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget. Next Steps

A Manager's Guide to Oracle Cost Containment

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Tips for building a cost-effective risk management plan

In this podcast, our expert will offer tips for... (SearchCIO.com) Many businesses employ cost management plans for specific projects, as well as for the over-all business model. When applying it to a project, expected costs are calculated while the project is still in the planning period and are approved beforehand. During the project, all expenses are recorded and monitored to make sure they stay in line with the cost management plan. After the project is finished, the predicted costs and actual costs can be compared and analyzed, helping future cost management predictions and budgets. Implementing a cost management structure for projects can help a business keep their over-all budget under control. Several business intelligence (BI) programs, such as Oracle Hyperion, offer cost management software to help businesses monitor costs and increase profitability. While the software may help, it is not imperative that software is used when executing a cost management plan.

Financial Accounting vs Management Accounting Diffen Economics Business Business Finance Accounting Management accounting is a field of accounting that analyzes and provides cost information to the internal management for the purposes of planning, controlling and decision making. Management accounting refers to accounting information developed for managers within an organization. CIMA (Chartered Institute of Management Accountants) defines Management accounting as Management Accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of information that used by management to plan, evaluate, and control within an entity and to assure appropriate use of an accountability for its resources. This is the phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making. Managerial accounting is concerned with providing information to managers i.e. people inside an organization who direct and control its operations. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside an organization. Managerial accounting provides the essential data with which organizations are actually run. Financial accounting provides the scorecard by which a companys past performance is judged. Because it is manager oriented, any study of managerial accounting must be preceded by some understanding of what managers do, the information managers need, and the general business environment.

Comparison chart</> EMBED THIS CHART Improve this chart Financial Accounting Management Accounting

Format:

Financial accounts are supposed to be in accordance with a specific format by IAS so that financial accounts of different organizations can be easily compared.

No specific format is designed formanagement accounting systems.

Planning and control:

Financial accounting helps in making investment decision, in credit rating.

Management Accounting helps management to record, plan and control activities to aid decisionmaking process.

External Vs. Internal:

A financial accounting systemproduces information that is used by parties external to the organization, such as shareholders, bank and creditors.

A management accounting systemproduces information that is used within an organization, by managers and employees.

Focus:

Financial accounting focuses on history.

Management accounting focuses on future.

Users:

Financial accounting reports are primarily used by external users, such as shareholders, bank and creditors.

Management accounting reports are exclusively used by internal users viz. managers and employees.

department:

preparing financial accounting is the work of finance department.

managerial accounting is not specific task of particular department. coordiantion of all department creates management accounting.

report frequency:

well defined - annually, semi-annually

whenever needed - daily, weekly, monthly.

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Financial Accounting

Management Accounting

Mandatory Vs. optional:

Preparing financial accounting reports are mandatory especially for limited companies.

There are no legal requirements to prepare reports on management accounting.

Time span:

Financial accounting statements are required to be produced for the period of 12 months.

No specific time span is fixed for producing financial statements.

Monetary Vs. nonmonetary:

Most financial accountinginformation is of a monetary nature.

Management accounting informationmay be monetary or alternatively non monetary.

Objectives:

The main objectives of financial accountng are :i)to disclose the endresults of the business, and ii)to depect the financial condition of the business on a particular date.

The main objectives of Management Accounting are to help management by providing information that used by management to plan, evaluate, and control.

Legal/rules:

Drafted according to GAAP - General Accepted Accounting Procedure.

Drafted according to management suitability.

Accounting process:

Follows a full process of recording, classifying, and summmarising for the purpose of analysis and interpretation of the finnancialinformation.

Cost accounts are not preserved under Management Accounting but analyses necessary data fromfinancial statements and cost ledgers.

Center of importance:

the financial accounitng , the origin of preservation of knowledge givesemphasis on recording keeeping on a whole firm basis for the purpose of decisions by all the users of accouning information, both external and internal.

Management accounting uses cost data for provision of information forstrategic management decisions. It is mainly concerned with the provision of help to the managers to asses them in the process of decision making and design business strategies.

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Financial Accounting

Management Accounting

segment reporting:

Describe whole organization.

Only covered part of organization (dept) - production department.

The differences between management accounting and financial accounting include:[1] 1. Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders 2. Financial accounting is required by law while management accounting is not. Specific standards and formats may be required for statutory accounts such as in the I.A.S International Accounting Standard within Europe. 3. Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost centres. Managerial accounting is used primarily by those within a company or organization. Reports can be generated for any period of time such as daily, weekly or monthly. Reports are considered to be "future looking" and have forecasting value to those within the company. Financial accounting is used primarily by those outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company. Management Accounting is the branch of Accounting that deals primarily with confidential financial reports for the exclusive use of top management within an organization. These reports are prepared utilizing scientific and statistical methods to arrive at certain monetary values which are then used for decision making. Such reports may include:

Sales Forecasting reports Budget analysis and comparative analysis Feasibility studies Merger and consolidation reports

Financial Accounting, on the other hand, concentrates on the production of financial reports, including the basic reporting requirements of profitability, liquidity, solvency and stability. Reports of this nature can be accessed by internal and external users such as the shareholders, the banks and the creditors. Contents [hide]

1 Regulation and standardization 2 Time Period 3 Other differences 4 References

Regulation and standardization[edit]

While financial accountants follow Generally Accepted Accounting Principles set by professional bodies in each country or International Financial Reporting Standards, managerial accountants make use of procedures and processes that are not regulated by a standard-setting bodies. Multinational companies prefer to employ managerial accountants who have a widely recognised certification such as CGMA, Chartered Global Management Accountant certified by the AICPA and CIMA, ACMA certified by the Institute of Cost Accountants of India [1], Chartered Management Accountant certified by the Chartered Institute of Management Accountants, or CMA, Certified Management Accountant certified by the Institute of Management Accountants. Time Period[edit] Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information. There is no time span for producing managerial accounting statements but financial accounting statements are generally required to be produced for the period of 12 previous months. Other differences[edit]

There is no legal requirement for an organization to use management accounting, but publicly traded firms (limited companies or whose shares are bought and sold on an open market) must, by law, prepare financial account statements. In management accounting systems there is no requirement for an independent external review but financial accounting annual statements must be audited by an independent CPA firm. In management accounting systems, management may be concerned about how reports will affect employees behavior whereas financial management concerns are about the adequacy of disclosure in financial statements.

http://en.wikipedia.org/wiki/Comparison_of_management_accounting_and_financial_accounting