lecture week 1 Essay

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Pages: 13

BUSN7031
Management Accounting and
Cost analysis
Introduction& cost terms
Ch 1 & 2

1

Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

Outline


Introduction to management accounting

o

The contemporary management accounting environment

o

Role of management accounting and the management control system



Cost terms:

o

Revised definitions

o o o

2

Cost groupings
Service, retail and manufacturing organisations

Flow of inventoriable costs and period costs

Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

Introduction


Two broad purposes for accounting information

1.

External reporting



Regulatory / legal requirements



Report to stakeholders (shareholders)

2. Internal reporting

3



information needs of users within organisation



– e.g., information for cost planning, resource allocations, performance evaluation and strategic planning

Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

Major differences

4

Financial accounting Managerial accounting Purpose

Help Managers
Make Decisions

Help Managers
Make Decisions

Primary users

External

Internal managers focus

Past oriented

Future-oriented

Rules

GAAP

No specific rule
(cost &benefit)

Time span

Annually, semiannually

Different time horizons Reporting entity

Entity

Varies

Reporting

Summarized

Detailed info

Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

What is management accounting


“... the processes and techniques that focus on the efficient and effective use of organisational resources, to support managers in their tasks of enhancing both customer value and shareholder value”



Resources
• Financial and non-financial information, work processes, 

employees, committed customers, and suppliers –
Shareholder value

• The value that shareholders or owners place on a business 

Customer value

• A customer’s subjective evaluation, of how well a product meets or exceeds expectations
5

Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

Cost vs. Management Accounting



A fine line between...

• Cost accounting is a process that involves measuring, analyzing, and reporting information (both financial and non-financial) relating to the cost of acquiring and using of resources in the organisation to produce (1)
Goods and/or (2) Services

6



Management Accounting is the process that involves measuring, analyzing, and reporting financial and nonfinancial information that helps managers to fulfill the goals of the organisations



Choosing, communicating , and implementing the business strategy (planning and control)



Coordinating business activities along the value chain

Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

Sustainability

7



Sustainability – ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland 1987).



Management accounting assists by:
– identifying relevant costs and benefits
– using activity-based costing
– carrying out a cost-benefit analysis of sustainability initiatives. Copyright ©2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442563377/Horngren/Cost accounting/2e

Strategic decisions and the management accountant •

Strategy – specifies how an organisation matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.



Strategic cost management – describes cost management that specifically focuses on strategic issues.
Management

accounting helps answer important

questions,…