COST ACCOUNTING
TOPIC 01a
The internal decisions (buy, sell, invest, use resources, manage people) are the ones ‘ TAILOR-
MADE’ like worksheets, reports, phone, mail, meetings, etc. These activities need internal
information and are used in management accounting and are made for a specific purpose.
The external decisions (finance) are the ones called ‘STANDARDIZED’ like financial statements
and are used in financial accounting.
Management Accounting Financial Accounting
Main user: Managers Investors and creditors
Primary objective: Be useful for decision making at
a reasonable cost
Provide true and fair view of
economic and financial situation
Format: Flexible and ad hoc Standardized (GAAP)
Unit of analysis: As needed Whole organization
Frequency: As needed Typically, annually
Perspective on data: Prospective admits subjectivity Retrospective avoids subjectivity
Regulation: Voluntary Compulsory
Reliability: Hierarchy External auditor the law
COST ACCOUNTING:
Cost accounting measures and reports financial and non-financial data that relates to the cost
of acquiring or consuming resources by an organization.
It provides information for both management accounting and financial accounting.
Why do organizations have costs? It is a consequence of using resources. Through a process of
transformation material labor, energy, etc., becomes a product or service.
Why do organizations need to know their costs? Because if you know how much does your
product cost and you know your company, you will be able to have more efficiency.
