COST.docx - Week 1 Introduction to Cost Accounting...

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Week 1: Introduction to Cost Accounting Introduction Congratulations on making it out of your first semester in the BS Accountancy program alive! You just passed both your ACCT 1013 and ACCT 1026, which gives you the fundamental knowledge and skills you need to continue understanding the entire field of Accounting. How wide could the Accounting field be? To achieve your dream of being a Certified Public Accountant in the near future, you need to pass the licensure examination for CPAs, which consists of 6 subjects, namely: Financial Accounting and Reporting (FAR) Advanced Financial Accounting and Reporting (AFAR) Management Advisory Services (MAS) Auditing (AUD) Taxation (TAX) Regulatory Framework for Business Transactions (RFBT) The major courses you have just finished last semester both fall under Financial Accounting and Reporting (FAR). It is in here where we follow accounting standards to be able to faithfully represent all business transactions and events and transform them into accounting information, and report the same to interested users, like the government, investors, suppliers, customers, among others. In this course, Cost Accounting and Control, we shall be moving on momentarily to another field of accounting which is significantly different as compared to financial accounting, which you were accustomed to in the previous semester. Lesson Proper Managers of business entities also use accounting information in its decision making. However, the accounting information used for external reporting purposes might be used differently by different managers. For example, let’s focus on sales. As presented in the financial statements, sales is a peso figure that shows how much revenue a business entity has obtained by selling products or services. A sales manager might be interested in the same figure, but for a different purpose, say determination of sales commissions to be paid to sales agents. A distribution manager might be interested not on the peso amount, but on sales volume, and broken down into sales per region, to determine which regions to focus on when it comes to deliveries and distribution. An advertising manager might also be interested in the sales volume, but for the purpose of determining which regions least avail of the products and services of the business entity, so that he can focus on advertising to those areas. A production manager might be interested in the sales volume per product to determine which products sell quickly, to be able to make a production schedule to cater to the demand of certain products. In making these decisions, we use Management Accounting, which measures, analyzes, and reports financial and nonfinancial information, but for a specific purpose other than external reporting.

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