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    Ashe Balcha
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    Cost chapter 1

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    Cost chapter 1

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    11 views24 pages

    Cost 1

    Uploaded by

    Ashe Balcha
    Cost chapter 1

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 24
    1, Means and Ends of O. 1.1. The Major Ost fam Accounting Accounting’ is a language that i who have an interest in an ati nanagers, shareholders and potential © aployees, creditors and the goverment. AS part ‘of understanding the purpose of °° System, one has to answer the following questions. «What is accounting? What is an accounting system? “Who are users ofthe accounting information? “Tyhat are the main purposes of an accounting system” “What means do accounting system uses to fulfil the ends? Let us answer each of these questions. A. What is accounting? ication & measurement) jc decision by the ‘Accounting is a branch of study concerned with the generat (ident and provision (communicating) of information in order to make sound econom ‘users of the information. 1, recording and communicating sof the information! e, a process of identifying, mea: ements and decisions by user Accounting is, therefor conomic information to permit informed ju o The basic inputs for the accounting prossss are conditions that must be recorded. The primary end products of accounting are: various summaties analysis and reports and _financial statements “Thus, fair presentation of financial business transactions and events OF affairs is the essence of accounting theory and practice, B. What isan Accounting System? ‘An accounting system is @ formal mechanism for guering, organizing, and ‘conomic information about an organization's activities. + ‘An accounting system is a formal means of gathering d i yccour g data to aid inate decisions in light of the overall goals or objectives of an organization, — ‘The accounting system uses forms, records, rocedi c . ants , Pr lures and device . operations of an economic entity fo produce the feedback in the fone oh oe necessary for management to plan and contro thse operations, and ae and aa Cocknolden), eredirs and goverment ag2n¢ies (judge the such ine COST & MANAGEMENT ACCOUNTING:1/ CHAPTER ONE/ COMPILED FOR AAU STUDENTS, MARCH. met 7D A ec ; require + Itis usually associated with Rontecurring decisions (strategic planning), situations that #4) ae special accounting analyses of reports, + This role asks: of the several lteeaatives avilable, which isthe Best? 60%" Ne. 1-1 Means & Kade of an Accounting System Mayon sey Tel it Problem solving data z Feige Po planning & decisions Scorekeeping data 2. Managers for planning & Attention directing data controlling cautine Problem solving data operations Scorekeeping date }. Outsiders for investors, tax collectors, regulators, & others qugenene = ett y ace on is often made between management accounting and financial accounting. Whi Se re ON Ee ac ttc papa, d reports financial and non-financial information that help ation. Thus, it focuses on intemal reporting, Mangers to fulfill the ncial Accounting? ¢) ecountng principles (GAAP) incude broad puidetines : ke up seeped accountng pasties ata given time, es aautiled rules ang by GAAP. Mangers are responsible forthe fina SiN Fepatle4, issued Q \ GiPage ‘able 1-1 Distinction between Management Accounting & Financial Accountins ~ Constrained Mandatory pene Emphasis ‘on _ precision é objectivity . Summary on primarily, with ihe ally whole. Less frequent (Mgxible) & mandatory: usually one year or quarterly Statuiory requirements: itis ‘jandatory to follows certain rules and regulations (income tax authorities, regulatory-agenci Historical costs ‘Organizational mangers + outside arties 1k is statutory requirement to get auldited the financial statements > Unifying concepts: Assets = Past orientation: trend analysis (19X8 nctual ys, 19X7 astual) cee pence Serie CoM noneah Pope Ue Minvensures dndxeponifin Tee HUNcialin formation MOF zation Wand pio jar? CAEN A ceoUNTINC Lar on7couMDES Cost Accounting 1.3. Relationship of Financial and Management ‘Accounting to Co ‘thin : ig ining the cost eS; Cost accounting is defined as “a technique or method for determining the co . oe This cool is detcinined by direct measurement, arbitany ss ss or Tae cal allocation.” The appropriate method of determining ost 2ePen jrcum! that generate the need for information. in ic i ts to an ss for tracing various input cos cess uses the traditional accounting form 0} Central to a cost accounting system is the proces te. Accounts containing cost 2% ‘organization's outputs (products or services). This pro¢ recordkeeping—general and subsidiary ledger accoum! : management accounting information include those dealing with sales, procurement eats Plant assets), production and inventory, personnel, payroll, delivery: ne A cet Franagement. Not allcost information is reproduced on the financial statements, howevet- Correspondingly, pots aancial accounting information i useful temanagers in performing thes daily functions. ‘Cost accounting creates an overlap between financial accounting and m Cost accounting integrates with financial accounting by providing pr financial statements and with management accounting by providing some o anagement accounting. costing information for f the quantitative, cost- ‘tased information managers need to perform their tasks. None of the three areas should be viewed asa and exclusive “type” of accounting, The Boundaries of each are not clearly and dy drawn and, because of changing technology and information needs, are becoming ‘ counting overlap catses the Financial and management accounting systems to articu! ed together to form an informational network. Because these Re ris ome must understand how cost accounting provides costs for financial statements a ent information needs. Organizations that do not manufacture products ma Je cost accounting systems. However, even service companies need to und ae services cost so that they can determine whether itis cost-effective to b a activities. e engaged _ g]page ; Accour 1.4. Application of Management Organization) The basic i of organization. However, withthe shift fr pe ironies ingle compan av ih vrs apleabl to all types of organizatio ..

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