PAMANTASAN NG LUNGSOD NG VALENZUELA

JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANTS

ACCOUNTING SCHOLASTIC GUILD

INTRODUCTION TO
COST ACCOUNTING
Cost Accounting and Control
[MAC 1]
S.Y 2022-2023

PREPARED BY:
Denielle D. Defante
Ranielle A. Paulino
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 PAMANTASAN NG LUNGSOD NG VALENZUELA
JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANTS
ACCOUNTING SCHOLASTIC GUILD

INTRODUCTION TO COST ACCOUNTING

Prepared by: DENIELLE D. DEFANTE & RANIELLE A. PAULINO

I. MAIN OBJECTIVE OF ACCOUNTING

Provide financial information about an economic entity to different type of users.

II. USERS OF FINANCIAL INFORMATION

➢ INTERNAL USERS – Managers for planning, controlling, and decision making.
➢ EXTERNAL USERS – Government, those who provide funds (Creditors), and those who have various interests in
the operations of the entity (Investors).

III. COMPARISON OF FINANCIAL ACCOUNTING AND MANAGERIAL ACCOUNTING

➢ Two major areas of accounting: Financial Accounting and Managerial Accounting.
Financial Accounting
✓ Use of accounting information for reporting to external
parties.
✓ Supplier of funds: Stockholders, Partners, Sole
Proprietors, Creditors.
✓ Reports prepared under financial accounting focus on
the enterprise as a WHOLE.
✓ Based on HISTORICAL TRANSACTION DATA.
Information may be HISTORICAL, QUANTITATIVE,
MONETARY, AND VERIFIABLE.
✓ Note: The data are historical and are supported by
documents.
✓ Financial accounting information is required for many
firms organized as corporations due to the
requirements of Securities and Exchange Commission
(SEC). Bureau of Internal Revenue (BIR) requires it
also for compliance with country’s tax laws.
Managerial Accounting
✓ Focuses on the needs of parties within the
organization.
✓ Reports prepared under managerial accounting
addresses INDIVIDUAL or DIVISIONAL CONCERNS.
✓ Information may be CURRENT or FORECASTED,
QUANTITATIVE or QUALITATIVE, MONETARY or
NON – MONETARY.
✓ Note: Managerial Accounting is not separate and
distinct from financial accounting.
✓ No requirement or legislation that mandates the format
or use of managerial accounting.

IV. COST ACCOUNTING

➢ Field of accounting that measures, records, and reports information about costs.
➢ Intersection between financial and managerial accounting.
➢ Cost accounting information is needed and utilized by both financial and managerial accounting.

V. MERCHANDISING VS MANUFACTURING OPERATIONS

❖ Merchandising Operations
➢ Normally buys a product that is ready for resale when it is received.
Beginning Merchandise Inventory P XXX
Total Purchases XXX
Cost of Goods Available for Sale XXX
Ending Merchandise Inventory XXX
Cost of Goods Sold P XXX

➢ Note: Beginning MI is added to the Total Purchases in order to get the Cost of Goods Available for Sale. After
that, the Cost of Goods Available for Sale is deducted to Ending Merchandise Inventory to get the Cost of Goods
Sold.
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 PAMANTASAN NG LUNGSOD NG VALENZUELA
JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANTS
ACCOUNTING SCHOLASTIC GUILD

❖ Manufacturing Operations
➢ Computation of Cost of Goods Sold for manufacturing company is more complex.
Beginning Raw Materials P XXX
Net Cost of Purchase XXX
Raw Materials Available for Use XXX
Ending Raw Materials XXX
Raw Materials, Used XXX
Factory Overhead XXX
Total Manufacturing Cost XXX
Beginning Work in Process XXX
Total Goods Put into Process XXX
Ending Work in Process XXX
Cost of Goods Manufactured XXX
Beginning Finished Goods XXX
Goods Available for Sale XXX
Ending Finished Goods XXX
Cost of Goods Sold P XXX

Illustration!

#HindiNaMarupokCompany presented the following: Beg, RM 100,000; Net Cost of Purchase

50,000; End, RM 30,000; DL 75,000; FOH 120,000; Beg, WIP 85,000; End, WIP 175,000; FG,
beg 45,000; FG, end 60,000. Compute the Cost of Goods Sold.

VI. USES OF COST ACCOUNTING DATA

➢ Provides a basis for determining product cost and aids management in planning and controlling operations.

VII. DETERMINING PRODUCT COSTS

➢ Cost Accounting procedures help management in gathering the data needed to determine product costs and thus
generate meaningful financial statements and other reports.
➢ Useful in making a variety of important marketing decision making.
1. Determine the Selling Price of a Product.
2. Meeting Competition
3. Bidding on Contracts
4. Analyzing Profitability

VIII. PLANNING & CONTROL

❖ Planning
✓ Process of establishing objectives or goals for the firm and determining the means by which the firm will attain
them.

❖ Three (3) Components of Planning

1. Strategic Planning – Concerned with setting long range goals and objectives to determine the overall direction
of the company.
2. Tactical Planning – Concerned with plans for a shorter range and emphasizes plans to achieve the strategic
goals.
3. Operations Planning – Relates to day-to-day implementation of tactical plans. Emphasizes the coordination
of the major factors of production.

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 PAMANTASAN NG LUNGSOD NG VALENZUELA
JUNIOR PHILIPPINES INSTITUTE OF ACCOUNTANTS
ACCOUNTING SCHOLASTIC GUILD

❖ Controlling
✓ Process of monitoring the company’s operations and determining whether the objectives identified in the
planning process are being accomplished.

IX. TWO BASIC PRODUCT COSTING SYSTEMS

1. Job Order Costing
✓ System for allocating costs to groups of unique products.
✓ Product costing system used by companies making one of a kind or special-order products.
2. Process Costing
✓ System applicable to a continuous process of the same or similar goods.
✓ Product costing system used by companies that make a large number of similar products or maintain a
continuous production flow.

X. MAJOR DIFFERENCES BETWEEN PROCESS AND JOB ORDER COSTING

PROCESS COSTING JOB ORDER COSTING

Homogenous unit pass through a series of similar
processes.
Costs are accumulated by processing department.
Unit costs are computed by dividing the individual
departments’ costs by the equivalent production.
The cost of production report provides the detail for the
Work in Process account for each department.
Unique jobs are worked on during a time period
Costs are accumulated by individual job
Unit costs are determined by dividing the total costs on the
job cost sheet by the number of units on the job.
The job cost sheet provides the details for the Work in
Process account.