South-Western Publishing Co.

Chapter One
Introduction to Cost Accounting
and Cost Management

Chapter 1-1
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Learning Objectives

Explain the similarities and differences among

financial, management, and cost accounting.
Describe the evaluation of accounting.
Identify and discuss the emerging themes in
cost accounting.
Discuss the importance of the accounting
system for internal and external reporting.

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Learning Objectives (continued)

Explain the need for cross-functional expertise

in today’s cost accountant.
Describe the role of cost accountants in an
organization.
Explain the importance of ethical behavior for
managers and accountants
Indentify the three forms of certification
available to internal accountants.

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Accounting Information Needs of

Managers
Employee Empowerment
Continuous Improvement

Managers need accounting information and

need to know how to use it.
Accounting information can help managers
identify problems, solve problems, and
evaluate performance.
Accounting information is used in all
organizations: manufacturing, merchandising,
and service.
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Financial and Management

Accounting
Management Accounting Accounting Financial Accounting
Information
System
1. Internal focus 1. External focus
2. Limited rules 2. Rigid rules
3. Future oriented 3. Historical focus
4. Internal evaluation 4. External evaluation
5. Detailed information 5. Information about the
about segments whole firm
6. Broad, covers many 6. More self-contained
many disciplines

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Emerging Themes in Cost

Accounting
Customer orientatiion
Total quality management
Time as a competitive element
Advances information technology
Advances in the manufacturing environment
Activity-Based Costing
Computer-Integrated Manufacturing
Just-In-time-Manufacturing
Service industry growth
Global competion

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Traditional Accounting System Versus Data-Based
Relationship Accouning System

Transactions Transactions

Journal Entries
Database
Posting to (Sharing of files)
Accounts
Custom
Financial
Reports Reports

Custom
Custom
Reports Reports
Reports

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Cost management--A Cross-

Functional Perspective
Manufacturing Technology

Computer Technology International

Marketing Information Technology

Cost Accounting Profession

Legal Management
Financial Management
Engineering

Behavioral Leadership

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The Accounting Function in a

Manufacturing Organization
President

Production Financial
Vice-president Vice-president

Machining Assembly Treasurer

Controller
Supervisor Supervisor

Controller’s Treasurer's
Functions Functions

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Role of Controller and

Treasurer

Controller Treasurer

1. Financial reports 1. Collection of cash

2. SEC reporting 2. Monitoring of cash
3. Tax planning and reporting payments
4. Performance reporting 3. Monitors cash availability
5. Internal Auditing 4. Short-term investments
6. Budgeting 5. Short and long-term
7. Accounting systems and borrowing
internal controls 6. Issuing of capital stock

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Ethics and Management Accounting

Ten Core Values

Honesty
Integrity
Promise keeping
Fidelity
Fairness
Caring for others
Respect for others
Responsible citizenship
Pursuit of excellence
Accountability

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Standards of Ethical Conduct for

Management Accountants
Competence
Ethical Behavior
Confidentiality
Integrity
Objectivity

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Management Accounting and

Ethical Conduct

Some Types of Unethical Conduct

Abuse of accounting information

Acceptance of bribes or gifts
Conflict of interest
Disclosure of confidential information

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Standard No. 1--Competence

ent Accountants have a responsibility to

Maintain professional competence.

Perform professional duties in accordance with relevant laws,
regulations, and technical standards.
Prepare complete and clear reports and recommendations.

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Standard No. 2--Confidentiality

nt Accountants have a responsibility to

Refrain for disclosing confidential information.

Inform subordinates as to how to handle confidential
information.
Refrain from using confidential information for unethical or
illegal advantage.

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Standard No. 3--Integrity

ent Accountants have a responsibility to

Avoid conflicts of interest.

Refrain from activity that would prejudice their ability to carry out their
duties.
Refuse gifts, favors, or hospitality that would influence their actions.
Refrain from either actively or passively subverting the attainment of the
organization’s legitimate and ethical objectives.
Recognize and communicate professional limitations that would
preclude responsibility judgment.
Communicate unfavorable as well as favorable information.
Refrain form engaging in or supporting any activity that would discredit
the profession.

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Standard No. 4--Objectivity

nt Accountants have a responsibility to

Communicate information fairly and objectivity.

Disclose fully all relevant information that could reasonably be
expected to influence user's understanding of the reports,
comments, and recommendations presented.

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Resolving Ethical Conflict

Courses of action:

Discuss problems with immediate supervisor except when it

appears the superior is involved.
If the immediate superior is the chief executive officer, or
equivalent, the acceptable reviewing authority may be the
audit committee, board of trustees, or owners.
Clarify relevant concepts by confidential discussion with an
objective advisor to obtain an understanding of possible
courses of action.
If the ethical conflict still exist after exhausting all levels of
internal review, the management accountant may have not
other recourse but resign.
Except where legally prescribed, communication of such
problems with external parties is not appropriate.

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Professional Certifications

CPA-The responsibility of a CPA is to provide

assurance concerning the reliability of
financial statements.
CMA-One of the main purposes of the CMA was
to establish management accounting as a
recognized, professional discipline, separate
from the profession of public accounting.
CIA-The focus of the CIA is recognize
competency in internal auditing rather than
external auditing as with the CPA.

Chapter 1-19