Cost accounting vs. management accounting: What's the difference?

If you’re an accountant, you know that the opportunities are endless for career specialization. As you start to narrow down your options to the path that’s best for you, it’s important to understand the details of the jobs you’re considering. Some specializations may seem similar, but there are key differences that may help steer your career direction. 

Two of these jobs are cost and management accounting. While both have similarities and live within internal accounting, there are distinct differences that you should understand if considering a career in these areas. Learn the details between cost vs management accounting to steer your career in the direction that most suits your interests and long-term goals. 

Cost and management accounting: What are they? 

Both cost and management accounting are internal accounting specializations. Both types of accountants are hired as part of an organization’s internal financial team and are essential to strategy, operations, and bottom line.¹ 

While cost accounting and management accounting also both heavily rely on investigation, analysis, and reporting: they differ in their reporting processes, scope, and approach. 

Management accounting basics 

Management accounting refers to the overall administration of an organization’s finances. Managerial accountants must gather and analyze data and create reports for decision-makers that help them make financially-sound choices for the company’s growth. 

Management accounting responsibilities include: 

• Financial, diagnostic, and forecast reporting 
• Product costing and valuation 
• Cash flow analysis 
• Budgeting 
• Inventory turnover analysis 
• Financial leverage metrics 
• Identifying financial opportunity 
• Financial allocation 
• Constraint analysis 
• Accounts receivable (AR) management 
• Efficiency optimization 
   

Cost accounting basics 

Cost accounting is a type of management accounting, where the accountant specializes in tracking, reporting, and optimizing a company’s spending—ultimately to increase cost efficiency and profit margins. 

Daily tasks for cost accountants include: 

• Cost analysis 
• Process and operation audits 
• Budget optimization 
• Cost reporting

Cost accounting’s findings and reports on internal costs, expansion opportunities, and financial data are all crucial to other teams’ decision-making and strategies for business improvement. 
 

Key differences between cost and management accounting 

There are several important differences when looking at cost vs management accounting—primarily related to their scope, reporting, and process approaches. 

Cost vs. management accounting: Scope 

Cost accounting has a narrow focus and singular dedication: investigate and optimize expenses and spending. Cost accountants get into the weeds of dollars spent on each process and product and look for immediate, actionable strategies to improve efficiency and lower spending. 

On the other hand, management accounting includes all things related to an organization’s finances—including the findings of cost accountants and other financial teams. Management accountants must have a big-picture understanding of all aspects of the company’s financial health and future. 

Cost vs. management accounting: Reporting 

Cost and management accounting professionals create reports as an essential part of their jobs. 

However, cost accountants report exclusively on their focus area, likely to other teams rather than directly to organizational management. Management accountants use their holistic understanding of the organization’s finances to create detailed reports and recommendations that inform upper-level management’s decision-making.² 

Cost vs. management accounting: Techniques 

Within cost accounting are several techniques particular to this specialization. Each method looks to answer a different question and solve a different problem:

• Standard cost accounting: comparing standard costs and actual costs with budgeted costs per product, process, or service 
• Activity-based costing (ABC): identifying and assigning costs based on the need of the activity or service, rather than evenly across processes 
• Job order costing: assigning costs based on specific jobs, especially within organizations that offer custom jobs or services
• Process costing: in industries of continuous production, accumulating costs over a set period of time and dividing by the units produced to determine cost per unit 
• Marginal costing (variable costing): evaluating product or service costs based only on costs that change with output (variable costs), without including fixed costs in the calculation 
• Lean accounting: streamlining accounting processes and focusing on concise, actionable insights to reduce waste and improve efficiency (supporting lean manufacturing goals) 
• Absorption costing: considering all costs (fixed and variable) associated with a product or service 
• Throughput accounting: emphasizing the company's sales minus the cost of materials (throughput contribution) to define profits and strategy 

Management accounting also implements specific techniques to solve specific problems. But as management accountants are responsible for overall financial reporting, they use both other teams’ findings and strategies across financial areas, including: 

• Marginal analysis: comparing the benefits gained by an activity with the additional costs that it will incur to decide if it’s advantageous 
• Trend analysis: analyzing financial statements to identify patterns and errors, resolve issues, and determine forecasting 
• Capital budgeting: identifying projects or activities that maximize returns on investment over a set period, strategize business plan long-term, and support risk mitigation 
• Constraint analysis: analyzing and identifying bottlenecks within the organization to improve performance and efficiency³ 
   

Cost vs. management accounting: How to choose? 

Both cost and management accounting careers bring benefits and challenges, opportunities for growth, and paths for achievement. So how do you choose between the two? 

Interests 

Your career is up to you! Your interests should guide you down are you choose between cost vs. management accounting. 

Goals 

Both cost and management accounting professionals have ample opportunity to achieve high-level positions in their careers. However, if you’re aiming to one day become a decision-maker within the company, like CFO, you’ll likely move into management accounting.

 Management accountants draw information from multiple specialists (like cost accountants) and therefore often manage large teams and many people—especially as they become experienced and credentialed management accountants. This makes management accounting a great stepping-stone into the C-suite roles. 

Salary 

Both cost and management accountants report a wide range of annual salaries, which obviously increase with experience and depend on multiple factors. That said, both careers also provide good earnings. 

Cost accountants make an average $79,585 annually in the US.⁴ Management accountants make an average $71,821⁵ yearly, with that number rises to an average $133,00 among Certified Management Accountants (CMAs).⁶ 

Succeed in cost and management accounting 

Whether you’re growing a cost or management accounting career, there are certifications that will help you gain more, enhance your resume, and achieve more job opportunities. 

Certified Management Accountant (CMA) certification

The Certified Management Accountant (CMA) certification is widely regarded as the gold standard professional credential in management accounting. 

Earning this certification equips you with the knowledge and opportunity to better serve your organization in higher roles, with greater responsibility. Being a CMA also brings job advancement, increased salary, greater respect, and other CMA benefits. 

Since management accounting includes cost accounting information, the CMA certification can help you excel in both cost and management accounting. 

Certified Public Accountant (CPA) license 

Although cost and management accounting careers are internally focused, earning your Certified Public Accountant (CPA) license is also very advantageous. 

The benefits of a CPA license include job security, increased earning, and—importantly—more job opportunities. Because the CPA Exam is extensive and tests a deep understanding of all key accounting basics, you can easily transfer those skills from a public firm to an organization’s internal finance team. 

Get started 

Whether you’re leaning toward cost vs. management accounting, grow your career by earning your CMA certification. 

Becker can help you earn this credential with our pass-guaranteed CMA Exam Review course! We leverage proven study tools and updated content to guarantee your exam-day preparation. 

Start by learning more about becoming a CMA with Becker's FREE CMA Exam Guide eBook. Download today and start achieving more in your cost and management accounting career! 

Stand out in finance and accounting as a Certified Management Accountant! 

In this FREE ebook, you'll learn more about the CMA certification, how to earn it, what kind of opportunities can open up, and whether it's right for you! 

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