CHAPTER 1: COST ACCOUNTING Business Function in the Value

FUNDAMENTALS Chain
1. Research and Development
Creation of Value in Organization  this involves
generating and
 In cost accounting, the goal experimenting with
is to assist managers in ideas related to new
achieving the maximum value products, services or
of their organization. processes.
 One of the fundamental  Research is the
services of cost accounting development of new
is measuring the effects of ideas while
decision on the value of the development is the
organization. application of the
 In order to create value, we developed idea.
need information that are  Research= expensed
sufficient and appropriate.  Development=
capitalized
The Value Chain 2. Design of products,
 A set of activities that services, or processes
transforms raw resources  Concerned with detailed
into the goods and services planning and
that end users purchases and engineering of
consume and the treatment or products, services or
disposal of any waste processes.
generated by them.  Develop a flexible
 The modern cost accounting production process
must ensure that the entire responding to changing
value chain is as efficient market needs.
as possible. 3. Production
 Acquiring,
Value Added Activities coordinating,
 When innovation happens to assembling resources to
satisfy customers, value is produce a product or
added to provide more deliver a service.
efficient products. DM Direct Materials
 For example, in 1990, a DL Direct Labor
phone was only used to make OH Overhead
phone calls while phones in TMC Total Manufacturing
year 2020 have multi- Cost
purpose. In here, there is  Prime Cost = DM + DL
innovation where value is  Conversion Cost = DL +
added. OH
 This happens in order to  Overhead is an indirect
establish loyal customers. expense
4. Marketing
 Deals with promoting
and selling products or
services to customer or
prospective customers.
5. Distribution
 
This cover delivering sensitive to the quality and
products or services to timeliness of accounting
customers information required by
6. Customer Service managers.
 Providing after-sale
support to customers.
Primary Applications of Cost
Financial Accounting vs. Accounting Systems
Management Accounting
 Cost Accounting System
Financial Management
Accounting Accounting provide sufficient and
appropriate data.
Purpose Communication Decision
of financial making  Performance evaluation- make
position or buy decision.
Requiremen Mandatory Optional  Obtaining information for
t
planning and control
Primary External Internal
Audience  For decision making.
Regulation GAAP, PFRS, None Financial Titles in an
/ PAS Organization
Guidelines
Frequency Quarterly, As Needed 1. Chief Financial Officer
Annual
External Auditors/ None
 Manages entire finance
Review Regulators and accounting function
Focus Past Information  VP or director of
Transaction to aid finance
decision
Scope Company Wide Narrow
 Highest position an
Perceptive accountant can have in
an organization.
2. Treasurer
Cost Accumulation  Manages liquid assets
 Involves the collection  Conduct business with
of cost data in some banks and other
organized way be means financial institutions
of an accounting system  Segregation of duties
 Collection or gathering C – custody
of cost data. A - authorization
R - recording
Cost Assignment E – execution
3. Controller
 The costing system traces
direct costs and allocates  Plans and designs
indirect costs to designated information and
cost objects. incentive systems.
 Identifies direct and  Managerial position
indirect costs. 4. Internal Auditor
 Ensures compliance with
Cost Management Framework laws and regulations
 Independent since they
 Managers worldwide are
report directly to
becoming increasingly aware
Board of Directors
of the importance of the
quality and timeliness of  Operational
products and service sold to 5. Cost Accountant
their external customers. In  Records, measures,
turn, accountants are estimates, and analyzes
becoming increasingly costs.
  Cost controller
 Works with financial
and operational manager
to provide relevant
information for
decisions.
Code of Conduct
 They have important ethical
responsibilities that are
related to competence,
confidentiality, integrity,
and objectivity.
P – Professional Behavior (you
do not have to associate
yourself into illegal acts
O – Objectivity (you should be
fair)
P – Professional Competence and
Due Care (you shall have
education, training, or
experience)
C – Confidentiality (things
must be kept confidential
unless you have the permission
to disclose any documents,
subpoena is issued, or used as
material for self defense)
I – Integrity (this is same
with professional behavior)