Management Accounting:

_Accounting is the way to communicate to the users via reports

_Report for internal users: Accounting report

_Report for external users: Financial statement

*Balance Sheet: Statement of financial statement

*Income statement: Comprehensive income statement:

+The income Statement: Statement of Profit and Loss

+The other comprehensive income statement: include stuff like unrealized gains (Increase in value of
asset that hasn’t been sold)

_Fair value principle: Always revaluate the value of the asset

*Cash flow statement:

+Cash is always from revenue and expense but revenue and expense may not lead to cash

_Expense: When you pay for something that doesn’t result in more asset

*Statement of change in equity:

_Equity:

+Retained earnings: Money kept in the firm instead of distributing it

+Share capital

+Share premium

+Dividends

+Funds

+Reserves

*Nominal account: a nominal account begins each accounting year with a zero balance (Income,
Expense)

*Real account: real account begins each accounting year with its balance from the end of the previous
year (Asset, Liabilities, Equity)

_When there’s difference between income and expense, you will include it in Income Summary, then
record the answer in retained earnings

+This process is called transfer. When it’s in debit, move it in credit vice versa

_If it’s for a period, sum all the figures from each time period (one quarter)

_If it’s for a specific point in time, only sum the beginning and end of the period (one month)
 Topic 2: Cost and Costing system

-How to record using inventory

+Direct material cost debit

+Direct material credit

+The remaining material is in inventory

*Cost: are resources used or consumed for producing or business activities during the period

*Cost classifications

• according to function: production costs and period costs

• according to identifiability/traceability with cost units: direct costs and indirect cost

• according to their behaviour/variability: variable costs, fixed costs or mixed costs)

• according to controllability: controllable cost and uncontrollable cost

• Classification on the basis of time: historical cost and pre-determined cost

*According to function

-Manufacturing costs: are incurred within the factory area. This is the cost of the sequence of operations
which begins with supplying materials, labour and services and ends with completion of production.They
appear on the income statement as cost of goods sold and on the balance sheet as inventory.

-Period costs: are non-manufacturing costs. This is the cost of resources used during accounting period
that are not assigned to products. They appear as operating expense on the income statement.

+Example: selling and distribution cost, administrative cost

Prime cost: The cost of

converting material into a
product

Conversion cost: The major

cost associated with producing
*according to traceability with cost units

-Direct cost: Those costs that can be specifically and exclusively identified with a particular cost object

-Indirect cost: Those costs which can not be identified specifically and exclusively with a given cost
object.

*Controllable and uncontrollable costs

 Managers’ performance evaluation can be enhanced by classifying responsibility centre costs as

either controllable by the manager or uncontrollable

 Ideally, managers should be held responsible only for costs they can control or significantly
influence

 Some costs are controllable in the long term but not in the short term

*According to level of activity ( Cost driver )

+Fixed cost: remain unchanged in total despite changes in the level of activity

+Variable cost: change in total in direct proportion to a change in the level of activity

+Mixed cost: include fixed and variable

+Cost behaviour: The relationship between a cost and the level of activity or cost driver

+Cost estimation: The process of determining the cost behaviour of a particular cost item

+Cost prediction: Using knowledge of cost behaviour to forecast the level of cost at a particular level of
activity
 TOPIC 3: MARGINAL COSTING AND ABSORPTION COSTING REPORT

Marginal costing: used to display information for marginal costing report

Absorption costing: used to display info for absorption costing report

COGS = opening finished goods inventory + finished goods inventory increase - closing finished good
inventory

1) Vì sao có công thức tính COG base on T-account

2) Explain tại sao net income khác biệt giữa 2 method absorption method and marginal

_Manufacturing cost

+Direct material include materials used/spent during production

+Direct labor cost include wages of workers in production

+Manufacture overhead cost include the raw material, utilities, depreciation, prepaid expense, salary
and benefit of labour spent/used in production at the the factory.
_Non-manufacturing cost:

+Selling cost: raw materials, utilities, depreciation used in business at the selling department

+Administrative cost: raw materials, utilities, depreciation but at the office

*Cost behavior Cost driver (level of activity)

+Fixed cos: total fixed cost (FE) unchanged, fixed cost per unit ( fE ) changes due to Cost driver

+variable cost: total variable cost (VC) changes, variable cost per unit ( vC ) unchanged

+Mixed/Semi cost: applied high-low method to separate mixed cost into fixed cost and variable cost
 TOPIC 4.1: JOB COSTING
*Operating cycle in a manufacturing company:

_Input process Manufacturing process Selling process

-Different from batch production: each batch might contains different product

_Step 1: Requirements of the job from customer

Agreement of the precise details of the items (quality, quantity, colour, delivery date, or special
requirements). Estimation for the job, then representing the quoted selling price

_Step 2: Loading the job on to the factory floor when materials, labour and equipment are available

+Materials requisitions are sent to stores and are used to cost the materials issued to the job concerned.

=> Direct materials cost will be recorded on a job cost card/sheet.

+The job ticket is passed to the worker who perform the first operation, and is passed to the cost office
from the worker who perform the final one.

=> Direct labour cost will be recorded on the job cost card/sheet.

+Direct labor: people directly making the product

+Indirect labor: people indirectly involved on making the product e.g, security, supervisor

+if the cost is over standard cost, recorded it as period cost

+For labor cost, if it’s overtime but to produce more, record it as manufacturing cost. If it’s from waste,
put it in cost of good sold
-We have to predict overhead cuz it’s not known until end of the period and we need to price products
quickly

-Don’t write abbreviation in the test

-Ending balance = beginning balance + total increases - total decreases

-D.M.C = D.M.C per unit * Number of units / Number of products produced

-D.M.C = beginning RM inventory + Purchases of RM inventory - Ending RM inventory

+beginning RM inventory + Purchases of RM inventory = Available RM for production

-D.L.C = labour rate * labour hours

Budgeted / Estimated M . O. H .C
-P.O.H.R =
Budgeted / Estimated Costdriver (level of activities)
-Applied M.O.H.C = P.O.H.R * Actual activities (Actual labour hours)

-Way 1: separate the D.M.C and COGS

-Way 2: combine D.M.C and COGS

1. What are the main elements in decision making of producing products ?

-Production capacity: Spare capacity or limited capacity

-Production period: short term/short run or long term/long run

2. Step to make decision basing on relevant information

– Step 1: Gather all costs/revenues associated with the decision.

– Step 2: Determine the relevant cost/revenues of each alternative.

– Step 3: Compare relevant costs/revenues and select an alternative.

3. Analyse the relevant information for decision making (D.M): 2 main cases (A) and (B)

(A) D.M with spare capacity: in short term fixed cost remained unchanged within relevant change

in long term Fixed cost will have a change

(A1): Equip replacement

(A2): Make or Buy( Inhouse or outsourcing)

(A3): Special order (Accept or Reject special order)

(A4): Drop or Retain a segment (Continue or discontinue)

(A5): Manufacturing decision making