Introduction:
The basic objective of accounting is to provide information that is useful in making business and economic decisions. What makes accounting information useful for decision-making? The answer is however the accounting information confirms to the qualities that should be possessed by the financial and cost & Managerial reporting. In view and addition to this, the importance of strategic cost management and costing techniques like Activity based costing should not be underestimated. This implies that organization should be installing appropriate framework of strategic cost management to reduce its costs in key areas on which the success of organization is heavily dependent.
Objective of the study:
The Project is presented with
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It is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company. In a Nutshell, it is primarily for external purposes. ✓ Cost & management accounting serves the following purposes:
The purpose of Cost & Management accounting is to enable management to get as for as possible the exact cost of goods manufactured or services rendered, to furnish necessary facts and figures for adequate and effective managerial control and to provide management data necessary to determine output and products that will result in most profitable operations. The purpose of cost accounting is to assess the profitability of a product or services, a department or the organization. In a Nutshell, it is primarily for internal purposes.
3. Stock Valuation Principles:
In financial accounting, stock or inventory is valued at cost or net realizable value (NRV) whichever is lower while in Cost accounting, inventory is valued at Cost.
4. Regulation: Financial Accountants follow GAAP (generally accepted accounting principles) set by professional bodies in each country, accounting concepts (as laid down by the Accounting Standards Board) plus statutory requirements of the Companies Acts.
While in Cost & management accounting it is tailored to suit the needs of the users or may follow CAS. and Standardization: Accounting standards of financial accounting is issued by the Institute of chartered accountants of India
Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.
The documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:
Preparing different income statements captures information in diverse ways to facilitate decision making on internal matters. The management needs to understand cost behavior in order to control the costs. Besides the production costs, changing sales patterns affects profitability and there is a need to achieve better sales accuracy after understanding cost behavior. Variable costing also captures information about the impact of changing operation on profitability and the management is better placed to make pricing decisions to maximize
However, the function and the objective of cost accounting is similar to management accounting. Hence sometime authors refer to management accounting and cost accounting as the same.
As accountants and auditors we are held to, and must comply with, two standards of professional conduct. Those standards are generally accepted accounting principles (GAAP) and generally accepted auditing standards (GAAS). GAAP enforces the uniform standards for preparing and presenting financial statements. GAAS governs the ways and means are used by public accountants when conducting an audit. GAAS establishes the standards for field work and mandates that sufficient evidence be found to provide reasonable assurance for issuing an audit opinion.
Cost accounting is a type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance (Cost Accounting, n.d.).
The management of the cost of the company's product is an important part, which a cost accountant has to deal with. The profit of the company depends on the extent of the control on the production cost of the product. As the increase in sales and the profitability is the main aim of the management, so it will attract more conflicts of views and multiple sources of actions. A cost accountant has work in this direction and clears the things to the management so that they can have appropriate decisions with regard to the product, its costs and the company's profits at
The main purpose of financial accounting is to prepare financial reports that provide information about a firm’s performance to external parties such as investors, creditors, and tax authorities. Must be performed according to GAAP (Generally Accepted Accounting Principles) guidelines.
Cost accounting systems are used to supply cost data information on costs incurred by a manufacturing process or department.
There are many users of accounting information who are interested in the financial statements of companies as they rely on the statements to make better financial decisions. The users can either be internal or external to the organisation. Depending on the type of business, there are sometimes different users. For example, one user of Sainsbury’s financial statement are shareholders but one user of LeSoCo’s financial statement is Board of Directors.
Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.
18 The management accounting information created and used primarily by internal users is intended above all for planning and control decisions.
It consists of weighting and combining the weights of the ten factors and to evaluate implementing ABC. The potential benefits of ABC can be analyzed in advance along two separate dimensions. And there are ten mediating factors (Pricing Diversity, Support Diversity, Common Processes, Cost Allocation, Growth of Indirect Costs, Pricing Freedom, Fixed Expense Ratio, Strategic Considerations, Cost Reduction Effort, Analysis Frequency) can guide management in determining the answers. The fist five factors (PD, SD, CP, CA, FG) based on the probability. The second dimension of the model seeks to establish decisions. lY axis potential for ABC due to cost distortion---PD.SD.CP.CA.FG lX axis proclivity to use cost information in decision---PF.FE.SC.CR.AF To start management must analyze and responses to two key questions: 1. For a given organization, is it likely that ABC will produce costs that are significantly different from those that are generated with conventional accounting, and does it seem likely that those costs will be "better"? 2. If information that is considered "better" is generated by the system, will the new information change the dependent decisions made by the management? After finish these questions managers of company can discuses the ten factors that support or reject implementation. Finally, the combined weighted scores are plotted as a point on one of the four quadrants of a graph.Plotting the Answers--- Use Contingency Grid Method The steps in the
On the other hand, current value accounting provides an efficiency measurement. This is because the profit of the good or services will be separated and recorded as the business’s asset before it sold. The separation of business gain and business asset must be done to make sure the accuracy of calculation for a
Management accounting also help the organisation to evaluate the internal financial situation of the organisation in regards of regulatory authorities, investors and shareholders. In order words, management accounting is interlinked with organisational operations on different levels that help the companies to operate in the national and international market (Kaplan & Atkinson,