The difference between cost accounting and management accounting is a subtle one. The Institute of Management Accountants (IMA) defines cost accounting as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs."

Management accounting as defined by the IMA is the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information, which is used by management to plan, evaluate, and control within an organization. It ensures the appropriate use of and accountability for an organization`s resources. Management accounting also relates to the preparation of financial reports for nonmanagement groups such as regulatory agencies and tax authorities. Simply stated, management accounting is the accounting used for the planning, control, and decision making activities of an organization.

From this definition of cost accounting and the IMA`s definition of management accounting, one thing is clear: the major function of cost accounting is cost accumulation for inventory valuation and income determination. Management accounting, however, emphasizes the use of the financial and cost data for planning, control, and decision making purposes.


Management accounting typically does not deal with the details of how costs are accumulated and how unit costs are computed for inventory valuation and income determination. Although unit cost data are used for pricing and other managerial decisions, the method of computation itself is not a major topic of management accounting but rather for cost accounting.

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