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Cost Accounting Chapter 1 Section 1

by: Emily Notetaker

Cost Accounting Chapter 1 Section 1 ACC3200

Marketplace > Appalachian State University > Business > ACC3200 > Cost Accounting Chapter 1 Section 1
Emily Notetaker
GPA 3.22

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This is a detailed outline of Section 1 from Chapter 1 in the textbook. I Hope this is helpful!
Cost Accounting
Rebecca Hutchins
Class Notes
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This 3 page Class Notes was uploaded by Emily Notetaker on Monday August 22, 2016. The Class Notes belongs to ACC3200 at Appalachian State University taught by Rebecca Hutchins in Fall 2016. Since its upload, it has received 8 views. For similar materials see Cost Accounting in Business at Appalachian State University.


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Date Created: 08/22/16
The Manager and Management Accounting Section 1 Financial Accounting, Management Accounting, and Cost Accounting Accounting Systems  used to record economic events and transactions such as sales, materials, purchases and processes the data into information helpful o Helpful to managers, sales representatives, production supervisors  Example: costs are collected by category (such as materials, labor, and shipping)  Provide information found in a firm's income statement, balance sheet, statement of cash flows, an performance reports o Managers use this information to make decisions  Example: a report shows an increase in sales of laptops and iPads at an apple store. Due to the increase in sales, the manager would hire more salespeople for that specific location There are different types of managers 1 Sales Manager a Would be interested in the total dollar amount of sales to determine the commissions paid to salespeople 2 Distribution Manager a Would be interested in the sales order quantities by geographic region and by customer-requested delivery dates to ensure vehicles get delivered to customers on time 2 Manufacturing Manager a Would be interested in the quantities of various products and their desired delivery dates so that he or she can develop an effective production schedule To simultaneously work with all three types of managers…  They use a Data Warehouse o Also known as infobarn  Consists of small, detailed bits of information that can be used for multiple purposes  Example: the sales order database will contain detailed information about a product, its selling price, quantity ordered, and delivery details for each sales order  Also use ERP Systems o A single database that collects data and feeds them into applications that support a company's business activities  Examples: purchasing, production, distribution, and sales Financial Accounting & Management Accounting Have Different Goals  Financial Accounting o Focuses on reporting financial information to external parties  Examples: investors, government agencies, banks, and suppliers based on Generally Accepted Accounting Principles (GAAP) o What is GAAP?  Generally Accepted Accounting Principles  A collection of commonly-followed accounting rules and standards for financial reporting  Very important o The most important way financial accounting information affects managers' decisions and actions is through compensation  Compensation is based on numbers in financial statements  Management Accounting o The process of measuring, analyzing, and reporting financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization o Managers use Management Accounting Information to:  Develop, communicate, and implement strategies  Coordinate product design, production, and marketing decisions  Evaluate a company's performance o Does NOT need to follow any set principles or rules (WHERE AS FINANCIAL ACCOUNTING DOES) o Key Questions  How will this information help manager do their jobs better?  Do the benefits of producing this information exceed the costs? o Note:  Reports such as balance sheets, income statements, and statements of cash flows are common to BOTH Management Accounting and Financial Accounting Major Differences between Financial Accounting & Management Accounting Management Accounting Financial Accounting Purpose of Information Help managers make decisions to fulfill an Communicate an organization's financial position organization's goals to investors, banks, regulators, and other outside parties Primary Users Managers of the organization External users such as investors, banks, regulators, and suppliers Focus and Emphasis Future-oriented (budget for 2014 prepared in Past-orientated (reports on 2013 performance 2013) prepared in 2014) Rules of Measurement Internal measures and reports do not have to Financial statements must be prepared in and Reporting follow GAAP but are based on cost benefit accordance with GAAP and be certified by external, analysis independent auditors Time Span and Type of Varies from hourly information to 15 to 20 Annual and quarterly financial reports, primarily on Reports years, with financial and nonfinancial reports the company as a whole on products, departments, territories, and strategies Behavioral Implications Designed to influence the behavior of Primarily reports economic events but also managers and other employees influences behavior because manager's compensation is often based on reported financial results Cost Accounting  The process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization  Provides information for both Management and Financial Accounting o Example: calculating the cost of a product is a cost accounting function that meets both the financial accountant's inventory-valuation needs and the management accountant's decision-making needs  Such as: deciding how to price products and choosing which products to promote  Also referred as Cost Management o Describes the activities managers undertake to use resources in a way that increases a product's value to customers and achieves an organization's goals o Includes making decisions to incur additional costs  Example: improve customer satisfaction and quality and to develop new products - with the goal of enhancing revenues and profits o Whether or not to enter new markets, implement new organizational processes, and change product designs are also cost management decisions  What is NOT Cost Management o Information o Accounting systems


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