This website uses cookies to ensure you have the best experience. Learn more

Management And Cost Accounting Theory Essay

1026 words - 5 pages


What is Accounting?

• Need for Accounting –
o Increased global trade,
o Rise in the complexities of business,
o Large scale, due to Industrial Revolution
• Father of double entry system of accounting – Luca di Bargo Pacioli (Italy, 1494)
• Accounting can be defined as recording, classifying, summarizing, analyzing and interpreting the business transactions.
• The function of accounting is to report to the owners, managers - at regular intervals, about the performance of the entity.
• Accounting facilitates planning & controlling the operations of the business.
• Based on the functions discussed earlier, ...view middle of the document...

✓ Cost sheets analysis
✓ Material costs
✓ Overheads costs
✓ Marginal Costing
✓ Break-even Analysis
✓ Budgetary Control
✓ Standard Costing


What is a Cost?

➢ ‘Cost’ is a loss of resources for achieving certain objectives or benefits/ advantages.
➢ ‘Cost’ is the amount of expense (actual or notional) incurred or attributable to a specified article product or activity.
➢ ‘Cost’ is always related to a particular object, i.e. difficult to assess any cost in isolation. E.g. – cost of 1 apple, ticket cost, exam fees etc.

Costing, Cost Accounting and Cost Accountancy

➢ ‘Costing’ is the technique and process of cost ascertainment.
➢ ‘Cost Accounting’ is the collection and recording of costs and preparation of periodical reports.
➢ ‘Cost Accountancy’ is the application of costing and cost accounting principles, methods and techniques for the purpose of managerial decision making.

Objectives of Cost Accounting
o Ascertainment of costs
o Fixing selling price
o Profitability analysis
o Cost control & cost reduction
o Ascertainment of profits of activities
o Assisting management in decision making
o Variance analysis (actual vs. budgeted)
o Measuring use of resources

Cost Concepts & Terminology

• Cost Object – anything for which a separate measurement of cost is desired. E.g. a product, a service, a project, a brand etc.
• Cost Unit – it is a unit of product, service or time in relation to which costs are ascertained/ expressed. E.g. cost per km, cost per litre etc.
• Cost Centre – it is defined as a location, person or an item for which costs may be ascertained for the purpose of cost control. For e.g. library (impersonal) and librarian (personal)
• Direct Cost – costs which can be directly related or allocated to an activity, cost unit, cost centre. E.g. raw material, labour cost in prodn.
• Indirect Cost – costs that cannot be directly linked or allocated to a cost unit, cost centre. E.g. consumables, driver salary in production.
• Opportunity Cost – value of sacrifice made or a benefit foregone by accepting an alternative course of action. E.g. land used for commercial property, & residential development foregone.
• Out-of-pocket cost – costs involving actual cash outflows. Mainly a short-run concept, used in determination of selling price.
• Product Cost – costs that are associated with purchase/ production/ sale of material. E.g. material, labour, transport etc. (variable costs)
• Period Cost – costs that are not associated with a product, but are incurred for a specific period. Costs are irrespective of actual activity. For e.g. electricity, rent etc. (fixed costs)
• Sunk Cost – costs that are incurred in the past (historical costs). Not useful in decision making in the current period.
• Relevant Cost – costs that are affected by management...

Other Essays Like Management and Cost Accounting Theory

The Fundamental Accounting Concepts And The Role Of Financial Accounting In Aiding The Decision Making Processes Of Four Different Non-Management Stakeholder Groups

2455 words - 10 pages concept is based on the principle that profits should never be anticipated before they have been earned and losses should always be recorded as soon as the organisation is aware of them. It is summarised by the well-known phrase 'anticipate no profit and provide for all possible losses'.Example:If Firm (A) was paid ,000 for a contract but the management are certain that final cost will be ,000, they should charge the 000 loss to this year's profit

Legitimacy Theory and Impression Management in Response to the Gulf of Mexico Oil Spill at Bp Plc

1341 words - 6 pages . Organization may list some new problems or measures about this event. 2.3 Methodology In the whole report, it will discuss different aspects about BP Company according to the annual report. It also can reflect whether BP is fit for the legitimacy theory or not. There are three categories will be discussed to analyze the corporate legitimacy which are text length, impression management and strategy. Text length: In different years annual reports

Discuss The Relationship Between Accounting Choices Made By Management And The Values Reported In Financial Statements And The Possible Reasons Why Those Choices Are Made

2485 words - 10 pages management and those prepared by the accountants. Section 269(9) states that `the accounts are made out in accordance with applicable approved accounting standards and that, by so doing ensures the accounts give a true and fair view.' (Australian National Companies and Securities Legislation with State variations). It would appear that what constitutes a true and fair view in relation to prepared accounting reports, differs somewhat between what

“(We Can) Conceive of Twentieth-Century Management Theory as Being Involved in a Double Movement of Constructing Organizational Reality and Rationality While Effacing the Process of Construction...

2110 words - 9 pages CRITICAL PERSPECTIVES – (BY ROBERT PHILIP ACQUAH) “(We can) conceive of twentieth-century management theory as being involved in a double movement of constructing organizational reality and rationality while effacing the process of construction behind a mask of science and naturalness, we can see Critical Management Studies as being engaged in a project of undoing this work, of deconstructing the reality of organizational life or


566 words - 3 pages The Nature of Cost Accounting Cost accounting has been defined by many accounting scholars in various forums. There is no one watertight definition of cost accounting, but the various definitions all point to certain common aspects about the subject. Below are some definitions by certain authorities : “That part of management accounting which establishes budgets and standard costs and actual costs of operations, processes, departments or

Management Accounting Developments

3336 words - 14 pages theory behind management accounting developments............................. 2 Application to practice- management accounting developments analysis and research of companies financial statements (Japanese point of view)....................................... 3 Conclusions

Current Development in Accounting Thoughts

2580 words - 11 pages accounting. In order for theories to be relevant and applicable to research and practice they need to be assessed against certain criteria. In general these criteria assist to determine whether theories are based on sound assumptions, logically deriving their conclusions, using supportive evidence, accepted by the majority and working in practice. The Historical Cost Accounting (HCA) is an example of a theory that complies with those criteria

Accounting Standards Board

1370 words - 6 pages addressing Segment Reporting, Discontinues Operations, and Valuation of Intangible Assets are examples of the equivalent or similar standards between the IASB and FASB (IASB Equivalents, 2011). MSA Program The Masters of Science in Accountancy program (MSA) helps and prepares students for a professional career in the Accounting field. The program helps students master the theory and principles that frames a wide range of problems and issues

Costing Methods

2818 words - 12 pages . Cost Accounting is accounting for cost aimed at providing cost data, statement and reports for the purpose of managerial decision making. The Institute of Cost and Management Accounting, London defines “Cost accounting is the process of accounting from the point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centres and cost units. In the widest usage, it embraces the preparation of

Management Accounting

851 words - 4 pages in organizations Management accounting is the internal business function responsible for collecting and reporting financial information for internal business use. Management accounting information often relates to the cost of materials and labor used to produce goods or services sold to consumers. This information is necessary for companies to determine the effectiveness and efficiency of business operations and how well they earn profits

Accounting Thoery

2074 words - 9 pages Financial Accounting Theory Chapter 8 – Summary The Positive Theory of Accounting 8.1 Outline In the text, Scott defines Positive accounting theory (PAT) as: “concerned with predicting such actions as the choices of accounting policies by firms and how firms will respond to proposed new accounting standards.” (263) PAT uses theory to predict the choices that management will make regarding their choice of accounting policies. This

Related Papers

Cost Management Accounting Essay

1040 words - 5 pages ACCT 3020 Cost and Management Account II Case Study Zhuhai Company The Company Zhuhai Company was a medium-sized, partly integrated paper company, producing white and kraft papers and paperboard. A portion of its paperboard output was converted into corrugated boxes by the Design division, which also printed and colored the outside surface of the boxes. Including Design, the company had four producing divisions and a

Cost And Marrketing Management Essay

2421 words - 10 pages JAIPUR NATIONAL UNIVERSITY, JAIPUR School of Distance Education & Learning Internal Assignment No. 1 Bachelor of Business Administration Paper Code: Paper Title: BBA – 201 Cost and Management Accounting Max. Marks: 15 Last date of submission: Note : Question No. 1 is of short answer type and is compulsory for all the students. It carries 5 Marks. (Word limits 50-100) Q. 1. Answer all the questions: 1. 2. 3. 4. 5. What do u understand

Management Accounting: Fixed And Variable Costs

524 words - 3 pages = $90001.Since we do not know the selling price, the Cost Volume Profit Analysis, Equation Method would be shown as follows:a.($X * 8000) - $5200 - $9000 = net incomeReferencesHorngren, C./Sundem, G./Stratton, W. (2005). Introduction to Management Accounting.(13th ed.). Upper Saddle River, NJ. Pearson Education Inc.American InterContinental University. (2007). ACG420-0701B-09: ManagerialAccounting and Organizational Controls. Assignment List. Retrieved on March 17,2007 from

Management Theory 2 Parts Recritment And Appraisils

2303 words - 10 pages Part A: 1 Managers of Human resources (HR) have a number of key processes that they guide staff through on a regular basis; four of these key processes are recruitment, appraisal, training and development. Part A: 1 of this essay details the links and some of the major tasks within these processes and analyses them using theory to back up the arguments made. Part A: 2 of this essay goes on to state how the processes are affected by employee‟s