It's that time of year again, class notes|
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IRC Nickname: Wayne|Eregion2 Group: Emeritus Posts: 3087 Member No.: 156 Joined: January 25, 2008 Total Events Attended: 8    | Cost accounting post, run now and save yourself!
Chapter 1: Introduction to Cost Management
Study Objectives:- Describe a cost management system, its objectives, and its major subsystems.
- Identify the current factors affecting cost management.
- Describe how management accountants function within an organization.
- Understand the importance of ethical behavior for management accountants.
- Identify the three forms of certification available to management accountants.
A system is a set of interrelated parts that performs one or more processes to accomplish specific objectives. Each part of a system is critical for achievement of the overall objective, where processes transform inputs into outputs until the final objective is reached. An accounting information system consists of interrelated manual and computer parts and uses processes such as collecting, recording, summarizing, analyzing, and managing data to provide information to users. Formal decision models will use inputs and provide recommended decisions as the information output.
The accounting information system can be divided into two major subsystems:- The financial accounting system (external users).
- The cost management system (internal users).
Objectives of Cost Management:- Costing of products, services, and other objects of interest to management.
- Planning and control; and
- Decision making.
The cost management system can be divided into two major subsystems:- The accounting system is a cost management subsystem designed to assign costs to individual products and services and other cost objects as specified by management in accordance with SEC and FASB rules and conventions.
- The operational control system is a cost management subsystem designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control of activities.
Factors affecting cost management:- Global competition.
- Growth of the service industry.
- Advances in Information Technology.
- Advances in the manufacturing environment.
- Customer orientation.
- New product development.
- Target costing encourages managers to assess the overall cost impact of product designs over the product's life cycle and simultaneously provides incentives to make design changes to reduce costs.
- Activity-based management identifies the activities produced at each stage of the development process and assesses their costs.
- Total quality management.
- Time as a competitive element.
- Efficiency.
The role of the management accountant:- Planning.
- Controlling.
- Continuous improvement.
- Decision making.
Accounting and ethical conduct:- Benefits of ethical behavior.
- Standards of ethical conduct for management accountants.
Certification:- Certificate in Management Accounting.
- Certificate in Public Accounting.
- Certificate in Internal Auditing.
A firm's value chain is the set of activities required to design, develop, produce, market, and deliver products and services to customers. The cost management system must track information relating to a wide variety of activities important to consumers.
Computer-Integrated Manufacturing (CIM):- The products are designed through the use of a computer-assisted design system (CAD).
- A computer assisted engineering system (CAE) is used to test the design.
- The product is manufacturing using a computer-assisted manufacturing system (CAM).
- An information system connects the various automated components.
Key terms:- Accounting information system.
- Activity-based management.
- Business ethics.
- Certified Internal Auditor (CIA).
- Certified Management Accountant (CMA).
- Continuous improvement.
- Controlling.
- Cost accounting system.
- Cost management system.
- Decision making.
- Electronic commerce (e-commerce).
- Electronic data interchange (EDI).
- Enterprise resource planning system (ERP).
- Feedback.
- Financial accounting system.
- Just-in-time manufacturing (JIT).
- Operational control system.
- Performance reports.
- Planning.
- Supply chain management.
- System.
- Target costing.
- Theory of constraints.
- Total quality management.
- Value chain.
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IRC Nickname: Wayne|Eregion2 Group: Emeritus Posts: 3087 Member No.: 156 Joined: January 25, 2008 Total Events Attended: 8 | Intermediate Accounting: Principles and Analysis.
Chapter 1: Financial Accounting and Accounting Standards.
Learning Objectives:- Identify the major financial statements and other means of financial reporting.
- Explain how accounting assists in the efficient use of scarce resources.
- Describe some of the challenges facing accounting.
- Identify the objectives of financial reporting.
- Explain the need for accounting standards.
- Identify the major policy-setting bodies and their role in the standard-setting process.
- Explain the meaning of generally accepted accounting principles.
- Describe the impact of user groups on the standard-setting process.
- Understand issues related to ethics and financial accounting.
Financial Statements:- Balance sheet.
- Balance sheet disclosures.
- Income statement.
- Statement of cash flows.
- Statement of owners' or stockholders' equity.
Capital allocation process:- Financial Reporting: The financial information a company provides to help users with capital allocation decisions about the company.
- Users (present and potential): Investors and creditors use financial reports to make their capital allocation decisions.
- Capital Allocation: The process of determining how and at what cost money is allocated among competing interests.
Challenges:- Nonfinancial measurements.
- Forward-looking information.
- Soft assets.
- Timeliness.
Objectives of financial reporting:- Useful in making rational investment, credit, and similar decisions.
- Helps assess the amounts, timing, and uncertainty of prospective cash receipts.
- Clearly portrays the economic resources and claims of an enterprise.
A set of standards that are generally accepted and universally practices are necessary; otherwise, each enterprise would have to develop its own standards, requiring their readers to familiarize themselves with every particular accounting and reporting practice. It would be almost impossible to prepare statements that could be compared.
Parties involved in GAAP standard setting:- Securities and Exchange Commission (SEC).
- Public/Private Partnership.
- SEC oversight.
- Enforcement.
- American Institute for Certified Public Accountants (AICPA).
- Committee on accounting procedure (1939-1959).
- Accounting principles board (1959-1973).
- Advance the written expression of accounting principles.
- Determine appropriate practices.
- Narrow the areas of difference and inconsistency in practice.
- Financial Accounting Standards Board (FASB).
- Financial Accounting Foundation (FAF).
- Financial Accounting Standards Board (FASB).
- Financial Accounting Standards Advisory Council (FASAC).
- Financial Accounting Foundation selects FASB members and offers funding and oversight.
- Smaller Membership.
- Full-time remunerated membership.
- Greater autonomy.
- Increased independence.
- Broader representation.
- Due process.
- Discussion memo.
- Public hearing.
- Exposure draft.
- FASB standard.
- Types of Pronouncements:
- Standards, Interpretations, and Staff Positions.
- Financial Accounting Concepts.
- Emerging Issues Task Force Statements.
- Government Accounting Standards Board (GASB).
Organizational Structure for Setting Accounting Standards:- Financial Accounting Foundation (FAF): To select members of the FASB and GASB and their Advisory Councils, fund their activities, and exercises general oversight.
- Financial Accounting Standards Board (FASB): To establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors and users of financial information.
- Financial Accounting Standards Advisory Council (FASAC): To consult on major policy issues, technical issues, project priorities and selection and organization of task forces.
- Governmental Accounting Standards Board (GASB): To establish and improve standards of financial accounting for state and local government.
- Governmental Accounting Standards Advisory Council (GASAC): To consult on major policy issues, technical issues, project priorities and selection and organization of task forces.
- Staff and Task Forces: To assist respective Boards on reporting issues by performing research, analysis, and writing functions.
GAAP categories:- A:
- FASB Standards, Interpretations, and Staff Positions.
- APB opinions.
- AICPA accounting research bulletins (ARBs).
- B:
- FASB Technical Bulletins (no longer issued).
- AICPA ndustry audit and accounting guides.
- AICPA statements of position.
- C:
- FASB emerging issues task force.
- AICPA AcSEC practice bulletins.
- D:
- AICPA accounting interpretations.
- FASB implementation guides.
- Widely recognized and prevalent industry practices.
Pressure groups on GAAP:- Investing public.
- Academicians.
- AICPA (AcSEC).
- CPAs and accounting firms.
- Business entities.
- Financial community.
- Preparers.
- Government.
- Industry associations.
Following the Norwalk Agreement memorandum of understanding, U.S. GAAP and iGAAP agreed to: 1) make their existing financial reporting standards fully compatible as soon as practicable, and 2) coordinate their future work programs to ensure that once achieved, compatibility is maintained.
FASB objectives:- Improvement in financial reporting.
- Simplification of the accounting literature and the standard-setting process.
- International convergence.
Necessity of international accounting standards:- Multinational corporations.
- Mergers and acquisitions.
- Information technology.
- Financial markets.
Key terms:- Accounting Principles Board (APB).
- Accounting Research Bulletins (ARB).
- Accrual-basis accounting.
- American Institute of Certified Public Accountants (AICPA).
- APB opinions.
- Auditing Standards Board.
- Committee on Accounting Procedure (CAP).
- Emerging Issues Task Force (EITF).
- Expectations gap.
- Financial accounting.
- Financial Accounting Standards Board (FASB).
- Financial Accounting Standards board interpretations.
- Financial reporting.
- Financial statements.
- Generally accepted accounting principles (GAAP).
- Governmental Accounting Standards Board (GASB).
- International Accounting Standards Board (IASB).
- Objectives of financial reporting.
- Public Company Accounting Oversight Board (PCAOB).
- Sarbanes-Oxley Act of 2002.
- Securities and Exchange Commission (SEC).
- Statement of Financial Accounting Concepts.
- Statement of Financial Accounting Standards.
- Wheat Committee.
Chapter 2: Conceptual Framework Underlying financial Accounting.
Learning Objectives:- Describe the usefulness of a conceptual framework.
- Describe the FASB's efforts to construct a conceptual framework.
- Understand the objectives of financial reporting.
- Identify the qualitative characteristics of accounting information.
- Define the basic elements of financial statements.
- Describe the basic assumptions of accounting.
- Explain the application of the basic principles of accounting.
- Describe the impact that constraints have on reporting accounting information.
A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements.
Conceptual Framework for Financial Accounting:- First level: Objectives of Financial Reporting.
- Second level: Qualitative characteristics of accounting information and elements of the financial statements.
- Decision makers (users) and understandability.
- Primary qualities: relevance and reliability.
- Secondary qualities: comparability and consistency.
- Third level: Recognition and measurement concepts; assumptions, principles, and constraints.
Basic Assumptions: - Economic Entity Assumption: difference between personal and corporate business.
- Going-Concern Assumption: assumes the company will have a fairly high continuance rate.
- Monetary Unit Assumption: money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.
- Periodicity Assumption: use of artificial time periods in accounting. The shorter the time period, however, the more difficult it is to determine the proper net income for the period.
Basic Principles of Accounting:- Historical-Cost Principle: GAAP requires that companies account for and report most assets and liabilities on the basis of acquisition price. Fair value information relates to current prices instead.
- Revenue Recognition Principle: Revenue recognition generally occurs when 1) realized or realizable and 2) when earned.
- Matching Principle: Companies tie expense recognition to revenue recognition.
- Full Disclosure Principle: 1) sufficient detail to disclose matters that make a difference to users, yet 2) sufficient condensation to make the information understandable. Includes notes to financial statements and supplementary information.
Constraints:- Cost-Benefit Relationship: cost of fulfilling informational requirements.
- Materiality: relevance on a company's overall financial operations.
- Industry Practices: The peculiar nature of some industries and business concerns sometimes requires departure from basic theory. Agricultural companies often report crops at market value because it is costly to develop accurate cost figures on individual crops.
- Conservatism: When in doubt, choose the solution that will be least likely to overstate assets and income.
Key Terms: - Assumption.
- Comparability.
- conceptual framework.
- Conservatism.
- Consistency.
- Constraints.
- Cost-benefit relationship.
- Decision usefulness.
- Earned (revenue).
- Economic entity assumption.
- Elements, basic.
- Feedback value.
- Full disclosure principle.
- Going-concern assumption.
- Historical-cost principle.
- Industry practices.
- Matching principle.
- Materiality.
- Monetary unit assumption.
- Neutrality.
- Notes to financial statements.
- Objectives of financial reporting.
- Period costs.
- Periodicity (time period) assumption.
- Predictive value.
- Principles of accounting.
- Product costs.
- Qualitative characteristics.
- Realizable (revenue).
- Realized (revenue).
- Relevance.
- Reliability.
- Representational faithfulness.
- Revenue recognition principle.
- Supplementary information.
- Timeliness.
- Understandability.
- Verifiability.
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IRC Nickname: Tnuac Group: Emeritus Posts: 1806 Member No.: 51 Joined: December 30, 2007 Total Events Attended: 58 | UK Cost Management Plan
That's how you manage cost
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~Aetas: carpe diem quam minimum credula postero~
"Seize the day and place no trust in tomorrow"
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IRC Nickname: Abs Group: Emeritus Posts: 2071 Member No.: 4 Joined: December 26, 2007 Total Events Attended: 97 | Wayne..you do this every time and I never understand a word of it lol
~Abs
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"I may not agree with what you say but I will defend to the death your right to say it."
Wg Council & Secondary Leader - 21/10/07 to 24/12/08
Msn: [email protected] |
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IRC Nickname: Danltn Group: Guest Posts: 268 Member No.: 734 Joined: May 31, 2008 Total Events Attended: 29 | | QUOTE (Tnuac @ August 24, 2008 06:34 pm) | | UK Cost Management PlanThat's how you manage cost |
Lol you gud son  But tbh, I blame the previous Chancellor of the Exchequer. Oh wait... -------------------- I'm just Dan.  |
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| Posted: September 14, 2008 10:42 pm  |
IRC Nickname: Wayne|Eregion2 Group: Emeritus Posts: 3087 Member No.: 156 Joined: January 25, 2008 Total Events Attended: 8 | Cost accounting.
Chapter 4: Activity-based Costing: (aka: the confusing-as-hell chapter).
Study Objectives:- Describe the basics of plantwide and departmental overhead costing.
- Explain why plantwide and departmental overhead costing may not be accurate.
- Provide a detailed description of activity-based product costing.
- Explain how the activity-based costing systems can be simplified.
Functional-based product costing uses direct tracing for direct materials and direct labor, and uses plantwide or departmental driver tracing or allocation to assign overhead costs based on predetermined overhead rates (budgeted annual overhead / budgeted annual driver level).
A cost system that uses predetermined overhead rates and actual costs for direct materials and direct labor is referred to as a normal costing system. Estimates are often based on last year's figures, adjusted for anticipated changes in the coming year. In functional-based costing, only unit-level drivers are used to calculate overhead rates.
Common Unit-level Drivers:- Units produced.
- Direct labor hours.
- Direct labor dollars.
- machine hours.
- Direct material dollars.
The total overhead assigned to actual production at any point in time is called applied overhead: overhead rate × actual driver usage.
In the plantwide rate approach, all budgeted overhead costs are accumulated into a single plantwide cost pool. A plantwide rate is then calculated using a single unit-level driver. Then overhead costs are assigned to products by multiplying the rate by the actual direct labor hours used by each product (example).
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| Posted: September 16, 2008 09:18 pm |
IRC Nickname: Hyperion Group: Ex-Member Posts: 1636 Member No.: 978 Joined: June 23, 2008 Total Events Attended: 141 | i'm sorry, how does this affect me? i am so lost.
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Dragon boots:29 Whips:2 |
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| Posted: September 16, 2008 09:49 pm |
IRC Nickname: Kiwi011 Group: Emeritus Posts: 3052 Member No.: 40 Joined: December 30, 2007 Total Events Attended: 21 | | QUOTE (For Sooth @ September 16, 2008 09:18 pm) | | i'm sorry, how does this affect me? i am so lost. |
it doesnt....this is a place to put his basic accounting notes. Like if his pc breaks he can always come here and find his notes again --------------------  |
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| Posted: September 16, 2008 10:53 pm |
IRC Nickname: Hyperion Group: Ex-Member Posts: 1636 Member No.: 978 Joined: June 23, 2008 Total Events Attended: 141 | rofl, i should do that.
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Dragon boots:29 Whips:2 |
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| Posted: September 17, 2008 03:40 am |
IRC Nickname: Havochaha Group: Ex-Member Posts: 2257 Member No.: 106 Joined: January 5, 2008 Total Events Attended: 113 | | QUOTE (Kiwi011 @ September 16, 2008 09:49 pm) | | QUOTE (For Sooth @ September 16, 2008 09:18 pm) | | i'm sorry, how does this affect me? i am so lost. |
it doesnt....this is a place to put his basic accounting notes. Like if his pc breaks he can always come here and find his notes again |
damn thats not a bad idea -------------------- Havochaha Perm Banned Oct 1st 2009 Havochaha Unbanned February 13th 2011  http://www.erepublik.com/en/referrer/Omar+DandanHow to Make 10m an Hour |
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| Posted: September 19, 2008 04:21 pm |
IRC Nickname: Wayne|Eregion2 Group: Emeritus Posts: 3087 Member No.: 156 Joined: January 25, 2008 Total Events Attended: 8 | | QUOTE (Havochaha @ September 16, 2008 10:40 pm) | | QUOTE (Kiwi011 @ September 16, 2008 09:49 pm) | | QUOTE (For Sooth @ September 16, 2008 09:18 pm) | | i'm sorry, how does this affect me? i am so lost. |
it doesnt....this is a place to put his basic accounting notes. Like if his pc breaks he can always come here and find his notes again |
damn thats not a bad idea
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I forget who it was ... maybe Karl ... who always used to post essays on the clan forums so he could have equal access to them from on campus. I thought it was a good idea too. -------------------- |
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