Introduction to Management Accounting Terms and Examples

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Introduction to Management Accounting Terms and examples

Accounting is the process of analyzing and recording transactions for the purpose of preparing reports for statutory reporting, decision making and control. Types of accounting

Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually performed by an accountant. The accountant creates reports from the recorded financial transactions recorded by the bookkeeper

Financial accounting
Reporting of the financial position and performance of
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• by traceability: Manufacturing costs are classified as either direct or indirect. Indirect costs are also known as overhead or burden. indirect costs are those costs which cannot be specifically associated with a particular cost object (A cost object is any organizational or physical entity to which costs are assigned or charged. A cost object might be a completed unit of product, a subassembly, a department, a worker in the department, a product line, or en entire division of a larger corporation.) When we talk about manufacturing costs, the typical cost object is a unit of output. Selling and administrative expenses may also be traced to products, product lines, organizational units [e.g., divisions or regions]. Such tracing MAY be useful in determining the relative profitability of the associated cost object [products or division, for example]. However, it is important to remember that S & A expenses are never inventoried and are never written off as part of cost of goods sold. • by relevance to the decision that we are making: In many decision making situations, certain costs are irrelevant. Costs are irrelevant to a decision if the don 't change as a consequence of the decision.

Cost behavior
Cost behavior is nothing more than the sensitivity of costs to
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