Describe the Differences Between Financial Accounting and Management Accounting

question 108

Essay

Describe the differences between financial accounting and management accounting.

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Definitions:

Traditional Costing

An accounting method that allocates overhead costs to products based on volume-related measures, such as direct labor hours.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on the actual consumption of resources.

Overhead Cost Allocated

Expenses related to the running of a business that are spread out across different departments or products.

Activity Rate

A rate used in activity-based costing to assign costs to activities based on their use of resources.