Académique Documents
Professionnel Documents
Culture Documents
• Measuring the effects of decisions on the value of the organization is one of the fundamental
services of cost accounting.
• Value chain- Set of activities that transforms raw resources into the goods and services that
end users purchase and consume
o Ex) component = production, activities = collection of resources to produce a product
or deliver a service, costs = machines and equipment and factory personnel
• Value added activities- activities that customers perceive as adding utility to the goods or
services they purchase
• Before product ideas are formulated, no value exits. Each component added increases value
to the product or service
Accounting Systems
• Financial Accounting (External)
o Reports financial position and income according to the accounting rules. Designed for
decision makers who are not directly involved in the daily management of the firm.
o Financial accounting data is comparable across firms
• Cost Accounting (Internal)
o Measures, records and reports information about costs. Designed for managers.
o No need for information to be comparable to similar information in other organizations
o Add value to organization by making good decisions. Better decisions = better
performance
• Cost Accounting, GAAP and IFRS
o GAAP- Generally Accepted Accounting Principles- rules to follow when preparing
financial statements
o IFRS- International Financial Reports Standards
o Cost Accounting info for financial accounting needs to be in accordance with GAAP and
IFRS
o Cost data for managerial purposes need not comply with GAAP and IFRS
• Customers of Cost Accounting
o Production level- cost info needed to control and improve operations
o Middle mgmt level- cost info is used to identify problems by highlighting when some
aspect of operations is different from expectations
o Executive level- info used to assess company’s overall performance
o Criticisms
Misuse of cost accounting information, not information itself
Problems when managers attempt to use accounting information that was
developed for external reporting for decision making