Cost accounting and financial accounting are two different branches of accounting. In order to understand the differences better, the following table will help greatly.
| Financial Accounting | Cost Accounting |
| It is used to record financial transactions and is used to know the financial position of the company. | It is used to control cost and to improve efficiency in the operations. |
| It is used to record assets, equity and liabilities according to the applicable accounting standards. | It is used to classify cost into the direct material, direct labour and FOH (Factory Overhead). |
| Financial accounting works around prescribed rules and regulations. | Cost accounting does not follow any set rules and standards. |
| Financial statements are necessary to be prepared under the corporate law. | Various types of reports are prepared on the discretion of the management. But there is no hard and fast rule to prepare certain types of reports. |
| Financial Accounting is a great tool for the management to decide over the matters such as reducing gearing of the company and to increase market share of the company. | Cost accounting targets cost control by using methods of over allocation, standard costing, process costing etc. |
| Financial statements are demanded by the tax authorities, Governments, Banks, Customers and suppliers. | Cosr accounting reports are required by the management for decision making. |
| External auditors are hired for expressing their views over the financial position and performance of the company and the true and fair view of the financial statements. | Internal auditors are appointed to check the efficiency and effectiveness of the management accounting system. |