Villamor, Shana O.

AC14 Chapter 1 - Intro to Cost Accounting

LO1. What are the relationships among financial, management, and cost accounting?

Financial accounting focuses on preparing and providing financial statements to provide useful
information to external users like investors and creditors. On the other hand, management accounting
focuses on planning, controlling operations, making decisions, and evaluating performance to provide the
information needed by internal users such as owners and employees. While cost accounting is the
intersection of financial accounting and management accounting providing cost information to both
external parties and internal managers. 

LO.2 What are the sources of authoritative pronouncements for the practice of cost accounting?

The sources of authoritative pronouncements for the practice of cost accounting that issue cost
accounting guidelines or standards are the Institute of Management Accountants (IMA), The Society of
Management Accountants of Canada, and the Cost Accounting Standards Board (CASB). 

LO.3 What are the sources of ethical standards for cost accountants?

The Sarbanes Oxley Act is a law passed by the US Congress to hold chief executive officers (CEOs) and
chief financial officers (CFOs) personally accountable for their organizations’ financial reporting. The IMA
also administers the CMA exam and CMAs are required to adhere to the IMA’s Statement of Ethical
Professional Practice which focuses on competence, confidentiality, integrity, and credibility. 

LO.4 What is a mission statement, and why is it important to organizational strategy?

A mission statement that expresses the purposes for which the organization exists, what the organization
wants to accomplish, and how its products and services can uniquely meet its targeted customers’ needs.
It is important to organizational strategy because it plans for how the firm will fulfill its goals and
objectives by deploying its resources to create value for customers and shareholders. 

LO.5 What must accountants understand about an organization’s structure and business environment
to perform effectively in that organization? 

To perform effectively in an organization accountants must understand the authority and responsibility of
every individual which are reflected in the organizational structure. This exhibits the management style
that the organization is utilizing. Understanding the basic manner in which the organization interacts with
its business environment would help the accountants communicate more effectively with the people
inside the organization.

LO.6 What is a value chain, and what are the major value chain functions?

The value chain is a set of value-adding functions or processes that convert inputs into products and
services. The major value chain functions are research and development, design, supply, production,
marketing, distribution, and customer service. 

LO.7 How is a balanced scorecard used to implement an organization’s strategy? 

The balanced scorecard (BSC) is implemented in an organization’s strategy by identifying and improving
the organization’s internal operations to help external outcomes be better. They measure both leading
and lagging that focus on customers, internal business processes, employees, and shareholders.

LO.8 Why is ethical behavior so important in organizations?

Ethical behavior is important in organizations because it clearly lays out the rules for behavior and boosts
business credibility. Not adhering to the approved standards of social and professional behavior would
result in damage to reputation and loss of business.
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