Financial Accounting is a backward looking discipline - it observes the world from the stern of the ship and measures its wake.
Cost or Management Accounting is a forward looking discipline – it observes the world from the bow of the ship and helps navigate the ship toward its destination.
How Cost Accounting helps companies become the one everyone else is copying.
Chrysler estimates that, since it began implementing Activity Based Cost Accounting (ABC) in 1991, the system has generated hundreds of millions of dollars in benefits by helping simplify product designs and eliminate unproductive, inefficient, or redundant activities. The benefits have been 10 to 20 times greater than the company’s investment in the program. At some sites, the savings have been 50 to 100 times the implementation cost.
Safety-Kleen, a midsize waste-recycling company, introduced ABC into its organization and has reaped more than $12.7 million in cost savings, cost avoidance, and increased revenues—more than 14 times its investment in the program. The company, based in Elgin, Illinois, has used ABC to prune product lines, rationalize operations, and expand into new markets.
Source: Harvard Business Review