Management Accounting And Cost Analysis

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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,
Show More

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