ACCOUNTING 6: COST ACCOUNTING AND CONTROL

History of Accounting
 Egyptian is where the first to use the paper and pen. And the first one to
develop the recording of information
Infrastructure of Egypt: Pyramids

TEMPLES OF BABYLONIAN
Clay tablets
Woods
Stones

 Accounting was already practice in ancient times

Philippine Institution of Certified Public Accountants (PICPA) Philippine

 mother organization of all certified public accounts in the Philippines

Accounting Standard Council (ASC) Philippine Institution of Certified Public

 mandated by PICPA to promulgate the guidelines
 the accounting standard setting body in the Philippines

Statement of Financial Accounting Standard (SFAS)

 rules and regulated product by ACS
 sometimes known as the Bible of Accounting
ACCOUNTING 6: COST ACCOUNTING AND CONTROL

SFAS No. 1
 ACCOUNTING is a service business. Its function is to provide quantitative
information primarily financial in nature about economic entities that is useful
in making economic decisions. It would be beneficial to the users.
Three points to remember:
 It involves quantitative information.
 The information of accounting is primarily financial in nature.
 The information is intended for making economic decisions.

American Institute of Certified Public Accountants (AICPA)

 Is an art of recording, classifying, summarizing a significant
manner of business transaction and events which are in part of at least a
financial character and interpreting the results thereof.

Phases of Accounting
 RECORDING is writing of business transaction and events in the bank of
accounts.
Journalization:
Journal is a book of original entry
Ledger is a book of final entry
 CLASSIFYING involves the sorting or grouping of similar items into their
respective classes or kinds.
 SUMMARIZING is the determination of the balance of each account in
preparation of financial statement.
 INTERPRETING is the analytical phase of accounting

Result of operation Financial condition

Stable Solvent
Profitable
ACCOUNTING 6: COST ACCOUNTING AND CONTROL

Types of Users of Accounting

 INTERNAL USER is a user of accounting information that has direct access
of accounting information.
 EXTERNAL USER is a user of accounting information which does not have
direct access.
Examples:
Investor is the one providing the financial resources of business in terms of money.
And the owner of business enterprises (External User)
Owners can be (Internal User) if sole proprietorship but if it is
partnership/corporation (External User)
Creditors (External User) Debtor - Creditor
Stockholders is the one who waits for share of stock (External User)
Manager is the one who managing the business (Internal User)
Bookkeeper is the one who making the accounting information (Internal User)

 COST ACCOUNTING is an expanded phase of general or financial

accounting which informs management promptly with the cost of rendering
a particular service, buying, and selling the products, and producing a
product.

Types of Business
 SERVICES BUSINESS is a type of service business that engaged rendering
to consumer. It is the skill offering a business and it does not have
inventory.
 TRADING/MERCHANDISING is primary purpose is to buy and sell
products. It does have inventory.
ACCOUNTING 6: COST ACCOUNTING AND CONTROL

 PRODUCT BUSINESS/MANUFACTURING is engage in production of

business. A complicated system in production of product and the division of
labor.

COST ACCOUNTING is the field of accounting that measures, records, and

reports information about costs.
Similarities in some activities:
 Purchasing
 Storing
 Selling
 Both have require efficient management
 Both require adequate sources of capital
 Both of them employs hundreds or thousands of workers

Comparison of Financial, Managerial,

and Cost Accounting
Two Major Areas of Accounting
 FINANCIAL ACCOUNTING is the use of accounting information for
reporting to external parties including investors and creditors. Its primarily
concerned with financial statements for external use by those who supply
funds to the entity and other persons who may have vested interest in the
financial operations of the firm.
 MANAGERIAL ACCOUNTING is focuses on the needs of parties within
the organization, rather than interested parties outside the organization. Its
information commonly addresses individual or divisional concerns rather
than those of the enterprise as a whole. Also, it is not separate and distinct
from financial accounting.

AREAS WITHIN THE ORGANIZATION

Finance Dept.
HR Dept.
Production Dept.
ACCOUNTING 6: COST ACCOUNTING AND CONTROL

Connection of Financial/Managerial to
Cost Accounting
 Cost accounting is the intersection between the financial and managerial
accounting.
 Cost accounting is need and use by both financial and managerial
accounting.
 Cost accounting provides product cost information to external parties such
as stockholders, creditors and various regulatory board for credit and
investment decision.
 Cost accounting provide product cost information also to intended parties
such as managers for planning and controlling.