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Chapter48 An introduction to management accounting. What is management accounting?. Management means decision making . Accounting means The systematic recording, reporting, and analysis of financial transactions of a business .

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what is management accounting
What is management accounting?

Management means decision making.

Accounting means The systematic recording, reporting, and analysis of financial transactions

of a business.

Management accountingis used within a business to provide them with the basis to make informed business decisions that will allow them to be better in their management and control functions.

m anagement accounting
Management accounting

The cost recording component is called cost accounting.

Cost accounting is needed for a company management in measuring financial performance. There are many types of costs!!!! =()=‘’

management accounting
Management accounting

Historical cost

A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company.

management accounting1
Management accounting

Product costs

combined costs of raw material and labor incurred in producing goods cost - the total spent for goods or services including money and time and labor

Period costs

is an expense; it is charged against sales revenues in the period in which the revenue is earned.

management accounting2
Management accounting

Cost control

Costs are collected form cost centrefor individual cost units (unit of product or service)

management accounting3
Management accounting

Costing approaches!

These are a number of ways costs can be added and recorded.

The two most commonly used are

1. Absorption costing

2. Marginal costing


1. Absorption costing

Absorption costing uses the total direct costs and overhead costs associated with manufacturing a product as the cost base.

2. Marginal costing

Where costing is used which takes account of only the variable cost of products rather than the full production cost.

management accounting4
Management accounting

Costing systems

There are two main types of costing system

Job costing

When production consists of separate jobs

eg. a Rolls-Royce is made to each customer’s specification

Process costing.

When the production is continuous flow. In industries such as oil,textiles, food processing etc.

management accounting5
Management accounting

Budgeting and budgetary control

A formal statement of the financial resources set aside for carrying out specific activities in a given period of time.

· It helps to co-ordinate the activities of the organisation.