Ateneo de Zamboanga University

School of Management and Accountancy

Accountancy Department

LEARNING PACKET
COSMAN1, Session 2, First Semester, SY 2020-21

LEARNING PACKET 1
TOPIC: Introduction to Cost Accounting

I. CONCEPT NOTES

Purpose of Accounting?
-to provide financial information about an economic entity to different types of users

Investors
Creditors Financial
External
Government Accounting
Others

Users

Board of
Directors Managerial
Internal
Managers Accounting
Employees

Comparison
Financial Accounting Managerial Accounting
• Primary Users are external • Primary Users are internal
• Focus is historical information • Focus is future prospects
• Purpose is to communicate the financial • Purpose is to help managers and owners make
position and performance of a company decision to fulfill organization’s goals
• Information is mostly financial in nature • Information is both financial and non-financial
• Uses standards (IFRS, GAAP) that is required in nature
to be followed • No standards required to be followed
Cost Accounting
• It is the intersection between financial and management accounting because it addresses
informational demands of both financial and management accounting by providing information
to external and internal parties.

Relationship with Financial accounting - Inventory Valuation (production of units render cost, and cost
accounting gives financial information about costs related to production of a product)

Relationship with Managerial accounting - Decision making (costs incurred can be used for projection in
budgeting and forecasting, for pricing decisions, performance evaluation, and other management-
related tasks)

Interrelationship between the three disciplines:

• Cost information collected will be recorded in the journals, and these costs are used to plan and
decide for future prospects by managers
• To better use the cost information, managers should strategize on how to use capabilities and
opportunities to accomplish its objectives-thus the birth of strategic cost management
Strategic Cost Management
• Describes cost management that specifically focuses on strategic issues
• Questions that help managers formulate strategy:
 1. Customers
2. Market
3. Capabilities
4. Funding

One specific strategy is to focus on our Value Chain Analysis

Value Chain
 is the sequence of business functions in which customer usefulness is added to products.

Business Functions include:

A. Research and Development
B. Design of products and services
C. Production
D. Marketing
E. Distribution
F. Customer Service

Administrative Functions (accounting, HR, IT) support the business function

Supply chain
 the parts of the value chain associated with producing and delivering a product or service, which
are production and distribution
 describes the flow of goods, services, and information from the initial sources of materials and
services to the delivery of products to consumers, regardless of whether those activities occur in
the same organization or in other organizations

Key Success Factors

• Cost and Efficiency
• Quality
• Time
• Innovation

Professional Ethics
• Enron, WorldCom, Arthur Andersen eroded public confidence in corporations
• Earnings Management- any accounting method or practice used by managers or accountants to deliberately
adjust a company's profit to meet a predetermined internal or external target

Statement of Ethical Professional Practice

• CMAs are required to adhere to these set of standards which focuses on
A. Competence (level of professional expertise)
B. Confidentiality (appropriate use of confidential information)
C. Integrity (Mitigate conflict of interest, avoid discredit the profession)
D. Credibility (communicate information fairly and objectively)