Cost Accounting Notes 1

Video 1: Financial vs Cost Accounting:

* Difference between Financial Accounting and Cost Accounting:

* Financial Accounting: 1) Communicates a firm’s financial position to external parties (Banks, Equity investors)

2) Past oriented: financial statements of the past

3) In accordance to GAAP [Generally Accepted Accounting Principles]

* Management Accounting: 1) Focuses on internal users, facilitates management decision making

2) More future oriented

3) Reporting according to need:

- Managers try to anticipate future business changes, which involve projections which is

why these reports tend to not follow rules

- Managers also want information not stipulated by GAAP

* Financial Reporting: is intended to provide information useful to making business economic decision in which users are involved.

* Accounting System Output: Whether it is financial or management, it should be informative.

* Key Questions: 1) How will this information help managers do their jobs better?

2) Does the benefit out-weigh the cost of producing the information?

* Cost Accounting: 1) Cost Accounting is a subset of management accounting

2) Provides information to both Financial and Management Accounting

3) Example: Cost of Good Sold Inventory (F.A.) also falls under cost accounting.

4) Measuring, reporting, and analyzing financial and non-financial information related to the cost of using

and acquiring resources

5) “Costing things”

* Modern Cost Accounting => Management Accounting

Video 2: Strategic Cost Management:

* Strategic Cost Management: Simply cost management that focuses on strategic issues:

* Strategy: Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to

accomplish its objectives.

1. Product differentiation: A firm adopting this strategy attempts to differentiate itself from other...