CHAPTER 1: COST ACCOUNTING FUNDAMENTALS

Cost Accounting and Control (Lecture)

BS Accountancy 1 - 1 | Prof. John Lerry Martinez | Sem 1 2022

OUTLINE: nasa market kaya binabalik-balikan

➔ Definition of Cost Accounting regardless of the price.
➔ Goal of Cost Accounting
➔ Value Chain To successfully achieve these two, you
➔ Cost Accounting in the Value need to have the best cost information.
Chain
➔ Financial Accounting vs
Managerial Accounting

DEFINITION OF COST ACCOUNTING

A systematic set of procedures for
recording and reporting measurements of THE VALUE CHAIN
cost of manufacturing goods and
performing services in the aggregate and A set of activities that transforms raw
in detail. It includes methods for resources into goods and services that
recognizing, classifying, allocating, end users purchase and consume and the
aggregating and reporting such costs and treatment of disposal of waste generated.
comparing them with standard costs Simply, they are the process that the
(IMA). company usually does to satisfy the
Basically in cost accounting, we demands of the customers.
monitor yung mga ginagastos sa
production ng goods and services.
Detailed yung pag-momonitor ng costs. 6 Business Functions in which
Management/Cost Accountants Provide
GOALS OF COST ACCOUNTING Information That Helps Managers Make
● Valuation of inventory of cost of goods Decisions are:
sold 1. Research and Development -
● Aid in adding value to the organization generating & experimenting with
by aiding managers in ideas for new products,services,
decision-making. Cost information na etc.Studying of different methods
kinocollect is used by managers to of cost reduction and quality
have informed decisions rrgarding the improvement.
issues that is related in the entity. 2. Design of Products, Services and
Processes - creation and
Cost Leadership - mababa cost of development of products fit for
production that results to pagbebenta sa the market.
mababang presyo kaya attractive sa 3. Production - acquiring,
market. coordinating, and assembling
resources to produce new
Product Differentiation - unique at mataas products or deliver service.
quality ng product compared sa ibang

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CHAPTER 1: COST ACCOUNTING FUNDAMENTALS
Cost Accounting and Control (Lecture)
BS Accountancy 1 - 1 | Prof. John Lerry Martinez | Sem 1 2022

4. Marketing - promoting and selling kundi sa quality ng mga raw

in the market. materials na inaalok nila at if
5. Distribution - delivering of hindi delayed yung activities
products and services. nila.
6. Customer Service - after-sale
support to customers. ● Production
- Aids in valuation of inventory
COST ACCOUNTING IN THE VALUE and costs of goods sold.
CHAIN - Aids in developing the ideal
● Research and Development inventory policies.
- Develop cost-effective design - Bawat inventory policy may
- Help in making informed cost na kaakibat, bultuhan or
decisions regarding alternative maya't maya na maliliit yung
materials. volumes. Hindi laging ideal
- Each design and each yung bultuhan ng order kasi
modification will entail costs. kelangan isaalang alang yung
storage costs and opportunity
● Design cost. Hindi rin ideal yung maliliit
- Very critical stage because a na volume tas maya't-maya
large part of a product’s cost is kasi may cost din process ng
locked in once a design is orders. There must be a
chosen. BALANCE to get the ideal
- Cost-accounting helps inventory policy.
designers to understand the - Facilitates in planning capacity.
effects of design-modifications Maximum # units na kayang
to the behavior of costs. i-produce ng factory in a
- Lahat ng cost na related certain period of time.
mala-lock dahil sa design na
pinili mo from the purchasing ● Marketing
up until the very last part of the - Used in evaluating the
value chain. profitability of customer-groups.
- Ano mangyayari sa distribution
cost? production cost? and etc. ● Distribution
- Helps in choosing the best way
● Purchasing to deliver the goods to the
- Aid in evaluating the customers.
performance of suppliers.
- Hindi lang ginagamit sa issues ● Customer-Service
inside the company, - Helps tracking quality costs
ine-evaluate sila if kailangan pa and warranty.
rin bang i-maintain yung
suppliers hindi lang sa price

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CHAPTER 1: COST ACCOUNTING FUNDAMENTALS
Cost Accounting and Control (Lecture)
BS Accountancy 1 - 1 | Prof. John Lerry Martinez | Sem 1 2022

FINANCIAL ACCOUNTING VS more emphasized; for planning &

MANAGEMENT ACCOUNTING control.
➢Timeliness is required - if not timely
➔Cost-accounting serves both then it's not relevant for itself.
financial accounting and ➢Future orientation - more on
management accounting. planning & organizing things; what
➔Subfield of both fields. could happen to the company in the
➔Reports such as balance sheets future.
and income statements are ➢Reports about departments, product
common to both fields. lines, and sub-units - in detail. “Bakit
yung product A nakakapag produce
FINANCIAL ACCOUNTING ng mas malaking revenue kesa sa
product B?”
➢Reports for external users ➢Embraces other branches of
➢Objective and verifiable financial knowledge like economics, industrial
information - you can verify the engineering, and management
transactions that happened in the science
past through the FS the company ➢Not necessary follows IFRS & GAAP
has produced. - di pwedeng labagin but we can be
➢Precision is required more flexible on the format than
➢Historical orientation - recorded Financial Accounting.
operation that is summarized ➢Not mandatory for external reports -
through financial statements. company secrets; pang-planning
➢Reports of overall firm performance - lang ng company and
focuses on the whole; aggregate. decision-making.
➢Follows Generally embraces
accounting concepts only =
Generally Accepted Accounting SCOPE OF MODERN COST
Principles (GAAP) ACCOUNTING:
➢Follows IFRS (International 1. Cost Accumulation - organized
Financial Reporting Standards) collection of cost data
➢Mandatory for external reports - 2. Cost Assignment - designating costs
need sa Bureau of Internal Revenue to cost objects
(BIR) & Security of Exchange and 3. Application of Mathematical and
Commission (SEC) Statistical Techniques
4. Examination of the motivational
MANAGERIAL ACCOUNTING impact of accounting
5. Impact on finance, economics and
➢Reports for internal users operations management
➢Financial and non-financial; more
subjective in nature; relevance is