COST ACCOUNTING AND CONTROL
CHAPTER 1
COST ACCOUNTING
is an expanded phase of general or
financial accounting which informs
management promptly with the cost of
rendering a particular service, buying
and selling a product, and producing a
product. It is the field of accounting that
measures, records, and reports
information about costs.
COMPARISON OF FINANCIAL,
MANAGERIAL, AND COST ACCOUNTING
Financial Accounting
- Is the use of accounting
information for reporting to
external parties, including
investors and creditors.
- Is primarily concerned with
financial statements for external
use by those who supply funds to
the entity and other persons who
may have vested interest in the
financial operations of the firm.
- Is required for many firms
organized as corporations because
of the requirements of the
Securities and Exchange
Commission.
Managerial Accounting
- Focuses on the needs of parties
within the organization, rather
than interested parties outside the
organization.
- Managerial Accounting
Information commonly addresses
individual or divisional concerns
rather than those of the enterprise
as a whole.
⁕ Managerial Accounting is not separate
and distinct from Financial Accounting.
⁕ Financial Accounting data are used in
the Managerial Accounting System.
→ Financial Accounting attempts to
present some degree of precision in
reporting historical information while at
the same time emphasizing verifiability
and freedom from bias in the information,
relevance to the general user, and some
egress of timeliness in reporting which is
not as critical in managerial accounting.
→ The timing of the information and its
relevance to the decision on hand has
greater significance to the internal
decision-maker.
→ Management is more concerned on the
timeliness of the information so
management cannot wait until tomorrow
for the information that is required for
today’s decision.
Cost Accounting
- Is the intersection between
financial and managerial
accounting.
- Cost Accounting Information is
needed and used by both financial
and managerial accounting.
- Provides product cost information
to external parties, such as
stockholders, creditors and various
regulatory boards for credit and
investment decisions.
MERCHANDISING VS.
MANUFACTURING OPERATIONS
A merchandising company resells
goods that it purchases from its
suppliers.
A merchandising company normally
buys a product that is ready for resale
when it is received. Nothing needs to be
done to the product to make it salable
except possibly to prepare a special
package or display.
A manufacturing company produces
goods from raw materials, which are
later sold as a finished product.
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