Final answer:
The correct statement is that cost accounting is a subset of both management and financial accounting. It provides essential cost information for internal management decisions and external financial reporting but neither management accounting nor financial accounting is a subset of cost accounting.
Step-by-step explanation:
The statement that is true among the options provided is: b. Cost accounting is a subset of both management and financial accounting. Cost accounting focuses on capturing a company's total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense.
It serves as a key component of both management accounting, which aims to provide internal reports to managers for decision-making, and financial accounting, which is concerned with providing financial information to external parties like investors, creditors, and tax authorities in accordance with generally accepted accounting principles (GAAP).
Therefore, while cost accounting informs both internal management and external reporting, it is not correct to say that management accounting or financial accounting is a subset of cost accounting, as management accounting includes broader topics beyond costing, and financial accounting includes other areas such as the creation of complete financial statements that are not exclusively concerned with costs.
Therefore, b.Cost accounting is a subset of both management and financial accounting is correct.