COST AND MANAGEMENT ACCOUNTING
In cost accounting, primary emphasis is on cost and it deals with collection,analysis, relevance, interpretation and presentation for various problems of management. Management accounting utilizes the principles and practices of financial accounting and cost accounting in addition to other managementtechniques for efficient operation of a company. Both have the same objectives of assisting management in it¶s functions of planning, decision making, controllingand techniques like budgetary control, standard costing, marginal costing.
collection, summarization, and reporting of financial information about variousdecision centers (
throughout an organization; also called
activity accounting or profitability accounting
. It traces costs, revenues, or profitsto the individual managers who are primarily responsible for making decisionsabout the costs, revenues, or profits in question and taking action about them.
Responsibility accounting is appropriate where top management has delegatedauthority to make decisions. The idea behind responsibility accounting is that eachmanager's performance should be judged by how well he or she manages thoseitems under his or her control.Responsibility accounting is an underlying concept of accounting performancemeasurement systems. The basic idea is that large diversified organizations aredifficult, if not impossible to manage as a single segment, thus they must bedecentralized or separated into manageable parts. These parts, or segments arereferred to as responsibility centers that include:1
revenue centers, 2
cost centers, 3
profit centers and 4
investment centers.This approach allows responsibility to be assigned to the segment managers thathave the greatest amount of influence over the key elements to be managed. Theseelements include revenue for a revenue center (a segment that mainly generatesrevenue with relatively little costs
, costs for a cost center (a segment thatgenerates costs, but no revenue
, a measure of profitability for a profit center (asegment that generates both revenue and costs
and return on investment (ROI
for an investment center (a segment such as a division of a company where themanager controls the acquisition and utilization of assets, as well as revenue andcosts