CAT / FIA FFA Syllabus A. The Context And Purpose Of Financial Reporting - Purpose and role - Notes ^{6 / 6}

The purpose of cost and management accounting is

to provide information to managers that will help them to:

• plan the activities (e.g.) plan number of units to produce this year

• make decisions regarding activities (e.g.) purchase materials required for production

• control the activities (e.g.) control amount of materials being used for production

• evaluate the activities (e.g.) evaluate whether more/less materials were used per unit in comparison to the original plan

The information is used by managers, employees and decision makers internal to the organisation.

Management information is generally supplied in the form of reports.

Reports may be:

1. routine (monthly management accounts) or

2. prepared for a specific purpose (e.g. one-off decisions)

Cost accounting and Management accounting

Cost accounting and management accounting are terms which are often used interchangeably. 

It is not correct to do so. 

Cost accounting is a part of management accounting.

Cost accounting is mainly concerned with:

1. Preparing statements (e.g. budgets, costing)

2. Cost data collection

3. Applying costs to inventory, products and services

Therefore, management accounting goes beyond cost accounting.

In general, cost accounting information is unsuitable for decision-making.