Download Materi Introduction to Cost Accounting

n Chapter 1:
Introduction to Cost Accounting

n  Learning Objectives

n   What are the relationships among financial, management, and cost accounting?

n   What are the the sources of authoritative pronouncements for the practice of cost accounting?

n   What are the sources of ethical standards for cost accountants?

n   What is a mission statement, and why is it important to organizational strategy?

n   What must accountants understand about an  organization’s structure and business environment in order to perform effectively in that organization?

n   What is a value chain, and what are the major value chain functions?

n   How is a balanced scorecard used to implement an organization’s strategy?

n   Why is ethical behavior so important in organizations?

n  Accountants

n   Financial accountants provide information to external parties

q   Investors

q   Creditors

q   Regulators

n   Managerial accountants provide information to internal users

q   Managers

n   Cost accountants provide information to both internal and external users

q   Product cost information

n  Relationship of Financial, Management, and Cost Accounting

n  Types of Accounting

Financial

n   Meet external information needs

n   Comply with GAAP

Management

n   Meet internal information needs

n   Does not have to comply with GAAP

n  Financial versus Managerial

Financial

n   External focus

n   Whole organization

n   Historical

n   Quantitative

n   Monetary

n   Verifiable

n   GAAP

n   Formal recordkeeping

Managerial

n   Internal focus

n   Segments or divisions

n   Current/projected

n   Quantitative/qualitative

n   Monetary and nonmonetary

n   Timely/reasonable estimate

n   Benefits exceed costs

n   Formal and informal recordkeeping

n  Product Cost Information

n  External parties—stockholders, creditors, and regulators

q  For investment and credit decisions

q  Complies with GAAP

q  Enterprise focus

n  Internal parties

q  Planning, controlling, and decision making

q  Evaluating performance

q  Includes upstream and downstream costs

q  Disaggregated

n  Accounting Bodies

Financial

n   Public Company Accounting Oversight Board (PCAOB)

n   Securities and Exchange Commission (SEC)

n   Financial Accounting Standards Board (FASB)

Management

n   Institute of Management Accountants (IMA)

n   Society of Management Accountants of Canada

n   Cost Accounting Standards Board (CASB)

n  Management Accounting Organizations

§  IMA

q  Statements on Management Accounting

q  (not legally binding)

§  Society of Management Accountants of Canada

q  Management Accounting Guidelines

q  (not legally binding)

§  Cost Accounting Standards Board (CASB)

q  Government contracting standards

q  (legally binding)

n  Professional Ethics

n  Earnings management—deliberate accounting adjustments to “hit” profit targets

n  Often adjustments involve cost accounting

q  Product costs

q  Inventory valuations

n  Stretching legitimate accounting techniques

n  Outright fraud

n  Ethics and Legislation

n  Sarbanes-Oxley Act—CEOs and CFOs personally accountable for the accuracy of their organization’s financial reporting

n  False Claims Act—whistle-blower protection and penalties for failure to blow the whistle (disclose known financial frauds)

n  Ethics and Management Accounting

n  Standards of Ethical Conduct for Management Accountants

q  Competence

q  Confidentiality

q  Integrity

q  Credibility

n  Organizational Strategy

•                Develop mission statement

•                Implement strategy

•                Deploy resources to create value for customers and shareholders

•                Recognize that each organization is unique—thus unique strategies must be developed

n  Five Factors in Organizational Strategy

n  Core competencies

n  Organizational structure

n  Management style and organizational culture

n  Organizational constraints

n  Environmental constraints

n  Strategy Questions

n   Who are your five most important competitors?

n   Is your firm more or less profitable than these firms?

n   Compare prices for equivalent products/services.

q   Are they higher or lower? Explain the difference. Is it customers, costs, or profit requirements?

n   Are your costs higher or lower than those of main competitors? Where are the differences most pronounced?

n   What segment(s) of your business represents 80% profits?

n   For each business segment above, how large are you relative to the largest competitors? Are you gaining or losing relative market share?

n   What are your customers’ most important purchase criteria?

n   How do you and your competitors rate on these purchase criteria?

n   What are your main strengths and competencies? Are they appreciated by the market?

n   Which are your priority segments?

n   Where is it most important that you gain market share?

n   What is your competitive advantage?

n  Organizational Structure

n   Distribution of authority and responsibility in an organization

q  Authority—right to use resources to accomplish a task or achieve an objective

q  Responsibility—obligation to accomplish a task or achieve an objective

n   Line manager works directly toward attaining organizational goals

n   Staff employees give assistance and advice to line managers

q  Treasurer and Controller

n  Value Chain

q  Research and Development

q  Product Design

q  Supply

q  Production

q  Marketing

q  Distribution

q  Customer Service

n  Components of the Value Chain

n  Balanced Scorecard

n  Balanced Scorecard Perspectives

n   Learning and Growth

q   Use the organization’s intellectual capital to adapt to changing customer needs or to influence new customers’ needs and expectations through product or service innovations

n   Internal Business

q   Things to do well to meet customer needs and expectations

n   Customer Value

q   How well the organization is doing relative to important customer criteria

n   Financial

q   Address stockholders/stakeholders concerns about profitability and organizational growth

n  Balanced Scorecard Measures

n  Short-term and long-term

n  Internal and external

n  Financial and nonfinancial

n  Ethics in Multinationals

n  Foreign Corrupt Practices Act—prohibits bribes to obtain/retain business

n  Organization of Economic Cooperation and Development Convention—crime to offer, promise, give bribes to obtain/retain internal business deals

n  Questions

n  What is the relationship among financial, management, and cost accounting?

n  How is the balanced scorecard used to implement an organization’s strategy?

n  Where can an accountant find ethical standards for cost accounting?

n  Potential Ethical Issues

n  Earnings management

n  Low-cost production at any cost

n  Whistle-blower retaliation

n  Fixing prices

n  Bribery and other corruption

n  Hiding managerial acts