Acc Chapter 1

Chapter 1- Introduction

COST ACCOUNTING, MANAGEMENT MACCOUNTING AND FINANCIAL ACCOUNTING

What is cost accounting?

Defined by CIMA – ‘the application of accounting and costing principles, methods and techniques in the ascertainment of costs and analysis of savings and/or excesses as compared with previous experience or with standards’

Fundamental purposes

– to provide the management with detailed information relating to costs for planning, control and decision making

– to aid management for internal control activities

Objectives of Cost Accounting

– to determine/ ascertain cost

– to plan and control cost

– to make decision

– to allocate resources

What is financial accounting?

As defined by CIMA – ‘the analysis, classification and recording of the financial transactions and the ascertainment of how such transactions affect the performance and financial position of the business.’

What is management accounting?

As defined by CIMA – ‘the application of professional knowledge and skill in the preparation and presentation of accounting information in such a way to assist management in the formulation of policies and in the planning and control of operations of the undertakings.’

|Cost Accounting |Management accounting |

|Provide cost information |Use the costing information to formulate policies to plan and control.|

Differences between management accounting and financial accounting

|Basis |Management Accounting |Financial Accounting |

|Class of users |Internal |External |

|Legal compliance |None...