Management accounting has several key differences from the financial
accounting you have practiced thus far in your program. Financial
accounting requires accounting professionals to use Generally Accepted
Accounting Principles (GAAP) to prepare and present information in
standard format to external stakeholders. Management accounting, on the
other hand, is used internally to aid managers in making decisions about the
development and implementation of strategies, and it is based on cost–
benefit analyses tailored to the needs of individual companies. While cost
accountants provide the necessary data (related to the cost of using or
acquiring resources) used by financial accountants to prepare statements,
they chiefly play a critical role in the decision-making (planning),
implementation, and evaluation (control) functions of management
accounting. Chapter 1 in the textbook addresses these and other
considerations.
Cost accountants classify costs according to the various types, depending
on the characteristics of a company or situation. For example, some
classifications of inventory and period costs depend on a company’s
business sector, while a cost is classified as an indirect cost or direct cost
depending on the specific cost object for which a cost is being determined.
Understanding the types of costs and how they are employed in the costing
methods used in a company is critical to the success of the cost accountant.
Chapter 2 covers types of cost in detail. While some facets of a cost
accountant’s job, such as the costing method used by a company, are
predetermined, others require far more judgement on the part of the
accountant. According to Datar and Rajan (2017), “Management
accountants must promote fact-based analysis and make tough-minded,
critical decisions without being adversarial.”
Because the needs of individual companies and situations vary, the
resources and activities of this course focus on introducing both broad-
based knowledge and skills that can be used across a wide range of
activities, and a variety of methods and tools applicable to specific
situations. Chapter 1 of your textbook introduces a five-step decision-
making process that encompasses both the planning and control functions
and can be used to make almost any costing decision. The final project of
the course also gives you opportunity to practice critical skills related to
both functions by completing a real-world scenario. You will practice
controlling the cost of the press division of an educational services company
by implementing the job costing method and evaluating the results to make
a recommendation on whether in-house printing should continue. You will
also prepare both departmental and master budgets and financial
documents for the company. Budgets are created as part of the planning
function but also used to support the control function. Formative readings
and assignments will also cover activity-based accounting, inventory
costing, capital budgeting and cost analysis, and performance and the
balanced scorecard.
You begin this week by introducing yourself and sharing your expectations
for this course with your peers in the first discussion, and completing a
homework assignment on the reading.
Next week, you will be introduced to the job costing method, which you will
use to complete the Final Project I submission due in Module Three.
Reference
Datar, S. M., & Rajan, M. (2017). Horngren’s cost accounting (16th ed.). Boston, MA:
Pearson.
