Introducti

DIFFERENCE BETWEEN FINANCIAL ACCOUNTING AND COST ACCOUNTING

FINANCIAL ACCOUNTING MANAGERIAL ACCOUNTING

Provides information to Provides information to
external parties internal users
ex. Investors ex. Managers
Creditors
Regulators
Donors

ACCOUNTING DIFFERENCES

FINANCIAL MANAGERIAL
EXTERNAL FOCUS MONETARY INTERNAL FOCUS
WHOLE ORGANIZATION VERIFIABLE SEGMENTS AND DIVISIONS
HISTORICAL GAAP CURRENT/PROJECTED
QUANTITIVE FORMAL RECORD KEEPING QUANTITATIVE/QUALITATIVE

RELATIONSHIP OF FINANCIAL MANAGEMENT AND COST ACCOUNTING

COST TERMINOLOGIES ASSIGNING COSTS TO COST OBJECTS

Monetary value that a company spent in
COST order to produce a certain product D I R E C T CO S T S
can be easily and conveniently traced to a unit o
other cost object
 Examples: Direct materials and direct la
A product on a department of which I N D I R E CT C O S T S
COST OBJECT cost are accumulated
cannot be easily and conveniently traced to a un
or other cost object.
Examples: Manufacturing overhead

CLAS SIFICATION OF MANUFACTURING COSTS

DIRECT MATERIALS
Direct materials are raw materials that become an integral part of the products and that can be conveniently traced dire
Example: A radio installed in an automobile
DIRECT LABOR
Consists of labor costs that can be easily traced to individual units of product.
Example: Wages paid to automobile assembly workers
MANUFACTURING OVERHEAD
Includes all manufacturing costs except direct material and direct labor. These costs cannot be readily traced to finished p
Indirect materials that cannot be easily or conveniently traced to specific units of product
Indirect labor that cannot be easily or conveniently traced to specific units of product
EXAMPLES
DEPRECIATION OF MANUFACTURING EQUIPMENT
UTILITY COST
PROPERTY TAXES OF FACTORY
INSURANCE PREMIUMS INCURRED TO OPERATE A MANUFACTURING FACILITY
Only those indirect costs associated with operating the factory are included in Manufacturing overhead.
P R I M E C O S T AND C O N V E R S I O N C O S T
Manufacturing costs are often classified as follows:
P R I ME C O S T CONVERSION COST
FORMULA: DIRECT MATERIALS + DIRECT LABOR FORMULA: DIRECT LABOR + MANUFACTURING
It is direct cost that company incurs in manufacturing Combination of all direct and indirect production
a product. company incurs to convert raw material into fini

NON MANUFACTURING COST / PERIOD COST

FORMULA: SELLING COSTS + ADMINISTRATIVE COSTS
SELLING COST ADMINISTRATIVE COST
The cost incurred to secure customer orders and get The cost associated with the general managem
the finished product to the customer. organization rather than with manufacturing o
Selling cost can be either direct or indirect costs. Administrative costs can be either direct or ind

PRODUCT COST
All the cost involved in acquiring or making a product.
Product costs "attach" to a unit of product as it is purchased o manufactured and they stay attached to each unit of product
remains in inventory awaiting sale.
not outright expense you need to wait until it was sold before it become COGS FINISHED GOODS
INVENTORY
SOLD = COGS (EXPENSE)
UNSOLD = WORK IN PROCESS
INVENTORY
INVENTORY

Any materials that go

Consists of PRODUCT
MANUFACTURING units of COST
into the final product.
product that are only
RAW MATERIALS WORK complete
partially IN PROCESSand
will requie further
work before they are
BALANCE SHEET ready for sale to the
customer.
 Introduction and Cost Concepts
COUNTING TRANSFER OF PRODUCT COST

COST ACCOUNTANTS When direct materials are used in production, their cost are transferred from R
Provides information to Direct labor and manufacturing overhead costs are added to work in process to conve
both external and internal users Once units of product are completed their costs are transferred from work
ex. Product cost information When a manufacturer sells it finished goods to customers, the costs are transferred fro

COST CLASSIFICATIONS FOR PREPARING FINANCIAL STA

Manufacturing PRODUCT COST

include direct materials, direct labor, and
manufacturing overhead.

MANAGERIAL
MONETARY AND NON-MONETARY
TIMELY/REASONABLE ESTIMATE
BENEFITS EXCEED COSTS
FORMAL AND INFORMAL RECORD KEEPING

OUNTING COST CLASSIFICATIONS FOR PREDICTING COST BEHA

COST BEHAVIOR
refers to how a cost will react to changes in the level of
VARIABLE COST FIXED COST
varies, in total, in direct proportion cost that remains constant,
to changes in the level of activity in total, regardless of changes
variable cost per unit is constant in the level of the activity
If expressed on a per unit basis,
COST DRIVER the average fixed cost
measure of what causes per unit varies inversely
the incurrence of a variable cost. with changes in activity

TYPES OF FIXED COSTS

COMMITTED - Long term
cannot be significantly
reduced in the short term.
NING COSTS TO COST OBJECTS
DISCRETIONARY - May be altered
D I R E C T CO S T S in the short term by current
onveniently traced to a unit of product or managerial decisions.
other cost object
 Direct materials and direct labor
I N D I R E CT C O S T S
d conveniently traced to a unit of product
or other cost object.
ples: Manufacturing overhead

OSTS

an be conveniently traced directly to it.

s of product.
s

be readily traced to finished products.

ific units of product
c units of product

RING FACILITY
n Manufacturing overhead.

ONVERSION COST
T LABOR + MANUFACTURING OVERHEAD
direct and indirect production cost that a
convert raw material into finished goods

S
MINISTRATIVE COST
ted with the general management of an
her than with manufacturing or selling.
sts can be either direct or indirect costs.

.
ached to each unit of product as long as it
ISHED GOODS
NVENTORY

Completed units of
product that have not
yet been sold to
FINISHED GOODS
customers.
 R OF PRODUCT COST

ir cost are transferred from Raw Materials to work in process.

ed to work in process to convert direct materials into finished goods.
ts are transferred from work in process to finished goods.
s, the costs are transferred from finished goods to cost of goods sold

R PREPARING FINANCIAL STATEMENTS

PERIOD COST
include all selling costs and administrative costs.

S FOR PREDICTING COST BEHAVIOR

T BEHAVIOR
eact to changes in the level of activity.
FIXED COST MIXED COST
at remains constant, cost contains both variable
regardless of changes and fixed elements
level of the activity Consider the example of
sed on a per unit basis, utility cost
verage fixed cost
nit varies inversely
changes in activity

S OF FIXED COSTS
MITTED - Long term
ot be significantly
d in the short term.
ONARY - May be altered
hort term by current
agerial decisions.
 Cost Behav
Cost Behavior, Cost Function, and methods for analyzing Mix cost
VARIABLE COST

TOTAL IN PESO / NOTE: TOTAL IN P

UNITS / UNITS to get th
cost per unit then
PARA MAKUHA ANG multiply the cost
PER UNIT. unit by units to ge
- MALALAMAN MONG the missing Total
VARIABLE KAPAG peso or cost
CONSTANT ANG PER
UNIT.

Predicting Future Cost

 Understanding Mixed cost

Another word for variable rate is Variable C

HIGH - LOW METHOD FORMULA

First step: Compute for

the Variable rate per unit

Second step: Compute for

the Total Cost or Total Fix
cost

EXAMPLE

FIRST STEP: FIND THE TOTAL

VARIABLE RATE PER UNIT

Variable per unit = 5,870

1,900

= 2,520
900

Variable per unit = 2.80

SECOND STEP: FIND THE TOTAL
COST
 SECOND STEP: FIND THE TOTAL
COST
LAST STEP: TO PREDICT THE
MISSING COST
5,870 = 2.80 x 1,900 + FIX COST
5,870 = 5320 + FIX COST (VARIABLE RATE PER UNIT X UNITS) + F
5,870 - 5,320 = FIX COST
(2.80 x 2,200) + 550
FIX COST = 550
Predicting Future Cost= 6710

COST FUNCTION FORMULA

Y = 2.8 x
 Cost Behavior and Cost Function
yzing Mix cost LEAST SQUARE METHOD (OR LEAST SQUARE RE
FIXED COST
NOTE: TOTAL
TOTAL IN PESO
IN PESO /
/ UNITS
UNITS to get the
cost per unit then
multiply
PARAthe cost per
MAKUHA ANG
unitPER
by units
UNIT.to get
the missing Total inMONG
- MALALAMAN
pesoFIXED
or cost
COST KAPAG
FIXED ANG TOTAL IN
PESO MEANS NO
CHANGES SA COST

MIXED COST

TOTAL IN PESO / UNITS

EXAMPLE
PARA MAKUHA ANG PER
UNIT.
- MALALAMAN MONG
MIXED KAPAG BUMABA BATCH UNITS (X) TOTAL COST (Y) (X)(Y)
ANG PER UNIT NIYA. 1 680 29,800 20264000
2 820 34,000 27880000
3 570 27,500 15675000
4 660 29,000 19140000
5 750 31,900 23925000

TOTAL $3,480.00 $152,200.00 $106,884,000.00

NOTE: TOTAL IN
PESO / UNITS to get
the cost per unit then
multiply the cost per
unit by units to get
the missing Total in
peso or cost
 STEP ONE
CANNOT BE KASI DI
EQUAL AMOUNT ANG A.
152,200 =
-
- PARA MAG EQUAL 106,884,000 =
AMOUNT DIVIDE THE
HIGHER AMOUNT OF A SA cannot be
LOWER AMOUNT NG A
(152, 200 =
EXAMPLE: 3,480 / 5 = 696
After that i mu=multiply 106,884,000 =
-
mo ang nakuha mong 105931200 =
answer sa equation 1 952800 =
which is yung may small
amount 35,720

b =

S T E P T W O

r word for variable rate is Variable Cost Per Unit YOU CAN CHOOSE BETWEEN THE TWO EQUATION.

152,200 = 5
152,200 = 5
152,200 - 92,811.60
59,388.4
ompute for 5
e rate per unit

a
Choose between Highest
cost or lowest cost as your
total cost and for the units it
should be the partner that
you used in choosing cost

ND THE TOTAL
E PER UNIT

- 3,350
1,000
 LAST STEP: TO PREDICT THE
MISSING COST

RIABLE RATE PER UNIT X UNITS) + FIX COST

(2.80 x 2,200) + 550

Predicting Future Cost= 6710

ORMULA
550
EAST SQUARE REGRESSION METHOD)

XAMPLE

(X)(Y) X2
20264000 462400
27880000 672400
15675000 324900
19140000 435600
23925000 562500

$106,884,000.00 $2,457,800.00
 STEP ONE

5 a + 3,480 b
3,480 a + 2,457,800 b
cannot be

5 a + 3,480 b) 696
3,480 a + 2,457,800 b
3480 a + 2422080 b
35,720 b
35,720 b

26.67

T E P T W O

O EQUATION.

a + 3,480 x 26.67
a + 92811.6
= 5 a
= 5 a
5 a

= 11877.68

COST FUNCTION FORMULA

Y = 26.67 x 11,877.68
 Job
COSTING SYSTEM IN ASSIGNING COST

job order costing

JOB ORDER COSTING - INDIVID

TALAGA ANG PAG GAWA NG P

JOB ORDER COST SHEET - DITO

LAHAT NG COST SUMMARY NG
ORDER 1 AND SO FORTH

It can be lots or batches

bat small batches only

DIFFERENCE BETWEEN JOB ORDER AND PROCESS COSTING

More on custom sila hindi sila

nag mass production.
 More on custom sila hindi sila
nag mass production.

PER PRODUCT OR JOB ANG PAG COST ACCUMULATION BY

ACCUMULATE NG COST PROCESS OR BY DEPARTMENT
NA

DOCUMENTS USED IN JOB ORDER COSTING

BY JOB ORDER ANG PAG INPUT SA COST SUMMARY SEE THE EXPLANATION ABOVE (JOB ORDER COSTING)

MORE ON MATERIALS

RECORD NG MGA INDIRECT

RECORDS TO KNOW KUNG SINO NANG

NAG REQUEST NG CERTAIN MATERIALS.
PARA KAPAG NAG AUDIT MALALAMAN
KUNG GAANO KARAMING MATERIALS
ANG NIREQUEST KUNG SAPAT BA YUN OR
KULANG PARA MAGAWA ANG PRODUCT.
CLOCK CARD - ITO
NAMAN AY PARANG
ATTENDACE DITO MAG
SIGN NG TIME IN AT TO KNOW KUNG GAANO MO KATAGAL
TIME OUT AND GINAWA ANG PRODUCT. MAGKAKAROON
THROUGH THIS NG SENSE OF ACCOUNTABILITY KASI MAY
MALALAMAN NI STANDARD TIME SI MANAGEMENT
MANAGER IF NAG
OVERTIME KA BA OR
HINDI.

J O U R N A L E N T R I E S
PURCHASE MATERIALS
DIRECT OR INDIRECT INCLUDED NA DAPAT SI
MATERIALS FREIGHT-IN

ACCOUNTING TITLES DEBIT CREDIT

Materials XXX
Cash XXX

Materials XXX
Accounts Payable XXX
 2. ISSUANCE OF MATERIAL FOR PRODUCTION

SI
M ACCOUNTING TITLES DEBIT CREDIT
P Work in process XXX
L Raw materials XXX
E
E
N
T
R
Y 3. ISSUANCE OF INDIRECT MATERIAL
SI
M ACCOUNTING TITLES DEBIT credit
P Factory overhead control XXX
L
E Raw materials XXX
E
N
T
R
Y accounting titles debit credit
NOTE: PWEDE Work in process XXX
MONG
PAGSAMAHIN Factory overhead control XXX
SI DIRECT AT Raw materials XXX
INDIRECT
MATERIAL

4. incurrence of labor

ACCOUNTING TITLES DEBIT credit

Payroll expense XXX
Cash XXX

Payroll expense XXX

Accrued Payroll payable XXX

ACCOUNTING TITLES DEBIT credit

Payroll expense XXX
Cash XXX
SSS payable XXX
Philhealth payable XXX
Withholding tax payable XXX
GROSS
GROSS

5. assigning labor to each job

accounting titles debit credit

Work in process XXX
Factory overhead control XXX
Payroll XXX
ETO ANG
AMOUNT
NG PAYROLL
EXPENSE Kaya siya naka credit para matanggal na siya as
expense, pinapasok mo na siya as
manufacturing cost under work in process and
factory overhead control

pwede mo pag-isahin ng entry si 4 & 5

C
O accounting titles debit credit
M Work in process XXX
P
O Factory overhead control XXX
U Cash XXX
N
D
E
N IF PAYABLE PA
T
R ACCOUNTING TITLES DEBIT credit
Y Work in process XXX
Factory overhead control XXX
Accrued payroll payable XXX
SSS payable XXX
Philhealth payable XXX
Withholding tax payable XXX

GOVERNMENT PAYABLE

incurrence of actual overhead

(already recorded from indirect
labor and indirect materials)

ire-record dito yung ibang items na sumusulpot sa

actual overhead. Example depreciation expense
(overhead)
 ACCOUNTING TITLES DEBIT credit
SI
M Depreciation expense XXX
P Accumulated depreciation XXX
L
E
E
N Factory overhead control XXX
T
R Depreciation expense XXX
Y

pwede mo namang pag-isahin na lang din sila

ACCOUNTING TITLES DEBIT credit
Factory overhead control XXX
Accumulated depreciation XXX

UTILITIES EXPENSE
ACCOUNTING TITLES DEBIT credit
Factory overhead control XXX
Cash XXX

salary ng mga guard

ACCOUNTING TITLES DEBIT credit
Factory overhead control XXX
Accrued salaries payable XXX
 Job Order Costing

OB ORDER COSTING - INDIVIDUAL

TALAGA ANG PAG GAWA NG PRODUCT

OB ORDER COST SHEET - DITO ILALAGAY

AHAT NG COST SUMMARY NG JOB
ORDER 1 AND SO FORTH

OSTING
COST ACCUMULATION BY
PROCESS OR BY DEPARTMENT
NA

OVE (JOB ORDER COSTING)

MORE ON MATERIALS

FINISHED GOODS

NG MGA INDIRECT

CLUDED NA DAPAT SI
FREIGHT-IN

IF CASH
PINURCHASE

IF UTANG
PINURCHASE
 IF UTANG
PINURCHASE

Direct materials

Indirect materials

COM
POU
ND
ENTR
Y

IF CASH

IF PAYABLE

IF KASAMA ANG
GOVERNMENT
PAYABLES
(TAXES)

NET
 NET

DIRECT

INDIRECT

WALA MASYADONG W

IF NOT YET ACCOUNTING TITLES

PAID Accrued payroll payable
INITIALLY
(SIMULA) Cash
ISASAMA MO NA
RITO ANG
DEPRECIATION
EXPENSE.
DEPRECIATION
EXPENSE SHOULD
FORM PART OF
FACTORY
OVERHEAD
CONTROL
 WALA MASYADONG WORK FLOW DITO

ING TITLES DEBIT credit

able XXX
XXX
 actual overhead 1,000,000
estimated overhead 840,000
160,000

WIP 60,000 60/840 x

FG 300,000 300/840 x
FOH 480,000 480/840 x
840,000

WIP 280,000 280/2,430 X

FG 740,000 740/2,430 X
FOH 1,410,000 1,410/2,430 X
2,430,000
160,000 = 11428.57 0.07
160,000 = 57142.86 0.36
160,000 = 91428.57 0.57
160000