Chapter48 An introduction to management accounting

1. Chapter48An introduction to management accounting

2. What is management accounting? Management means decision making. Accounting means The systematic recording, reporting, and analysis of financial transactions of a business. Management accountingis used within a business to provide them with the basis to make informed business decisions that will allow them to be better in their management and control functions.

3. Management accounting The cost recording component is called cost accounting. Cost accounting is needed for a company management in measuring financial performance. There are many types of costs!!!! =()=‘’

4. Management accounting Historical cost A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company.

5. Management accounting Product costs combined costs of raw material and labor incurred in producing goods cost - the total spent for goods or services including money and time and labor Period costs is an expense; it is charged against sales revenues in the period in which the revenue is earned.

6. Management accounting Cost control Costs are collected form cost centrefor individual cost units (unit of product or service)

7. Management accounting Costing approaches! These are a number of ways costs can be added and recorded. The two most commonly used are 1. Absorption costing 2. Marginal costing

8. 1. Absorption costing Absorption costing uses the total direct costs and overhead costs associated with manufacturing a product as the cost base. 2. Marginal costing Where costing is used which takes account of only the variable cost of products rather than the full production cost.

9. Management accounting Costing systems There are two main types of costing system Job costing When production consists of separate jobs eg. a Rolls-Royce is made to each customer’s specification Process costing. When the production is continuous flow. In industries such as oil,textiles, food processing etc.

10. Management accounting Budgeting and budgetary control A formal statement of the financial resources set aside for carrying out specific activities in a given period of time. · It helps to co-ordinate the activities of the organisation.