Just as managerial accounting helps businesses make decisions about management, cost accounting helps businesses make decisions about costing. Essentially, cost accounting considers all of the costs related to producing a product. Analysts, managers, business owners and accountants use this information to determine what their products should cost. In cost accounting, money is cast as an economic factor in production, whereas in financial accounting, money is considered to be a measure of a company's economic performance.
The fifth principle of accounting is the principle of objectivity. Objectivity means that accounts are backed up by evidence (e.g. sales receipts, invoices, purchase orders). The medical equipment manufacturer follows the standard of objectivity by maintaining copies of sales orders while the hospital maintains objectivity by providing their accountant with receipts for the purchase.
The cost principle states that assets must be recorded on the date they are acquired, and at the amount for which they were acquired (regardless of whether they change in value over time). For example, the hospital records the value of the purchased medical equipment at the precise value it paid for them on May 1, despite the fact that such equipment depreciates over time.
Managerial accounting uses much of the same data as financial accounting, but it organizes and utilizes information in different ways. Namely, in managerial accounting, an accountant generates monthly or quarterly reports that a business's management team can use to make decisions about how the business operates. Managerial accounting also encompasses many other facets of accounting, including budgeting, forecasting and various financial analysis tools. Essentially, any information that may be useful to management falls underneath this umbrella.
While basic accounting functions can be handled by a bookkeeper, advanced accounting is typically handled by qualified accountants who possess designations such as Certified Public Accountant (CPA) or Certified Management Accountant (CMA) in the United States. In Canada, the three legacy designations—the Chartered Accountant (CA), Certified General Accountant (CGA), and Certified Management Accountant (CMA)—have been unified under the Chartered Professional Accountant (CPA) designation.