Tracing the roots of Cost & Management Accounting

Economics Study of Individuals & Nations economic behaviour

according to any school of thought.An Arial View

Accounting Process of systematic record keeping.

Financial Accounting. Art of systematic record keeping for a specific

individual or Business entity  An on ground view.

Cost Accounting. A step forward in financial Accounting, dealing with

individual items and their cost. A telescopic view.

Managerial Accounting.  Use of data of financial and Cost accounting for

decision making and forecasting  A Microscopic view

MBA (UOS) Lecture 1

 Main Branches of Accounting
o Governmental Difference in Government & Commercial
Accounting.
Accounting
1. Purpose.
2. Expenses or Income starting Point.
o Financial
3. Types of Accounts.
Accounting,
4. Statements.
5. Audit.
o Cost Accounting,

o Managerial
Accounting,

o Tax Accounting.

o Auditing.

MBA (UOS) Lecture 1

 Cost Accounting.
 Cost Accounting is the art of ;
1. Recording Collection
2. Classifying  Processing and
3. Appropriate allocation of
Expenditures for the determination of the
 Cost of products or services produced

and for the presentation of suitable arranged date for the

purpose of;
1. Control
2. Guidance of Management.

MBA (UOS) Lecture 1

 Managerial Accounting
 Use of financial and cost accounting data in the form of;

1. Establishment of Budgets,
2. Standard costs,
3. Actual cost of operations, processes and activities or products,

For analyzing,

 Variances,
 Profitability,
 And social use of funds.

MBA (UOS) Lecture 1

 History of Cost & Management Accounting.

 Ever since the use money replaced barter, people have been
concerned with costs.

 Industrial Revolution of 1780s a starting point of industrial

mass production and concern about selling point.

 Mass production of war equipments in 1st world war on cost

plus profit basis.

 Increase in Corporate Culture, Globalization & Competition

fueling the managerial accounting.

MBA (UOS) Lecture 1

 Costing Terms
 Cost.
o Replacement value of any product or service in terms of money.
 Expense.
o Expiration of cost either by sale of by use.
 Expenditure.
o Amount spent on the purchase of capital assets.
 Revenue.
o Total Sale proceed of a product or service received in terms of
money.
 Profit or Income.
o Excess of Revenue over its corresponding expense of cost.
 Loss.
o Excess of expense of cost over resulting revenue.

MBA (UOS) Lecture 1

 Difference in Cost & Financial Accounting

 Cost Accounting  Financial Accounting

1. Internal Users 1. External Users.
2. Specific Purpose statements 2. General Purpose Statements.
3. Must confirm to information needs 3. Must confirm to GAAPs.
4. Data in Monetary and Unitary form 4. Data in Monetary terms.
5. Statement on daily and weekly basis. 5. Statements on annual or half
yearly basis.
6. Emphasis on Control aspect.
6. Emphasis of Recording aspect.
7. Individual items.
7. Aggregate Results.
8. Relates mainly to cost transactions.
8. Relates to commercial transactions
9. Deals with actual and estimated facts and
including cost, admn an marketing
figures.
9. Deals mainly with actual facts and
10. Stocks are valued on Cost.
figures.
11. Positive & Normative Science.
10. Stocks are valued on LCM.
11. Positive Science.

MBA (UOS) Lecture 1

 Benefits of Cost & Management Accounting.
1. Analysis of Costs.
2. Correct Analysis.
3. Disclosure of Inefficiencies.
4. Price determination.
5. Effective Control.
6. Cost Comparison.
7. Make or buy decision.
8. Departmental & Product line efficiency.
9. Basis of Budgeting.
10. Forecasting,
11. Shut down decision.
12. Supply of relevant information to management.

MBA (UOS) Lecture 1