This document provides an introduction to strategic management accounting. It discusses cost accounting, management accounting, and financial accounting. Specifically, it defines cost accounting and discusses its objectives of ascertaining, controlling, and reducing costs. It also defines management accounting and explains that it aids planning, organizing, and decision-making. Finally, it discusses the differences between cost accounting, management accounting, and financial accounting.
1. 1
Introduction to Strategic Management Accounting
• Cost Accounting: Meaning, Objectives and Scope
• Concepts of Costs , Classifications and Elements of Cost
• Cost Centre and Cost Unit
• Methods and Techniques of Costing
• Cost Accounting Standards
• Relationship of Cost Accounting, Financial Accounting,
• Management Accounting and Financial Management
• Conflicts in Profit versus Value Maximization Principle
• Role of Management Accountant in Decision Making
2. 2
Course outcome / Topic learning outcome
Name of the Topic
covered
Topic Learning Outcome Course Outcome
Differences between
cost accounting,
management
accounting and
financial accounting.
• Understand how cost
accounting arises out
of the need to make
business decisions.
• Difference between
cost accounting,
management
accounting and
financial accounting.
• To familiarize with
costing terminology
Recall the concepts of
Management Accounting,
financial accounting and
cost accounting for the
role of accounting
information in planning
and control.
List the course outcome / Topic outcome
3. 3
Outcome achieved
Name of the topic:
Students will be able to do:
1
To acquire knowledge and understanding of the
concepts.
2
Techniques and practices of cost and management
accounting
3
To develop skills for decision making.
Differences between cost accounting, management
accounting and financial accounting
4. UNIT-1
MANAGEMENT ACCOUNTING VS COST ACCOUNTING
174
• Definitions, nature, scope, objectives and functions of
management accounting,
• importance and limitations of cost accounting and management
accounting; differences between cost accounting, management
accounting and financial accounting.
• Types of costing used in industries. Role of accounting
information in planning and control, cost concepts and
managerial use of classification of costs, the management
process and accounting.
• cost analysis and control: direct and indirect expenses,
allocation and apportionment of overheads, calculation of
machine hour rate (problems), introduction to activity based
costing and life cycle costing.
6. Objectives of Financial Accounting
174
1. Financial accounting is mostly concerned to record the
business transactions in books of accounts so that final
accounts can be prepared.
1
• Systematic recording of transactions
2
• Ascertainment of result of above recorded transactions
3
• Ascertainment of the financial position of business
4
• Providing information to the users for rational decision-making
5
• To know the solvency position
7. 174
1. Cost: cost as “the amount of expenditure (actual or notional)
incurred on, or attributable to a specified thing or activity”.
2. Costing: The process of ascertaining the cost is known as
costing. It consists of principles and rules governing the
procedure of finding out the costs of goods/ services.
3. Cost accountancy is the application of the principles of
costing and accounting. It is the science, art, and practice with
which a cost accountant practices cost ascertainment and cost
control.
8. Cost accounting
174
1. Cost accounting developed to help the internal
management in decision making. The information provided
by cost accounting acts as a managerial tool so that
business can utilise the available resources at optimum
level.
Objectives of Cost Accounting
1. Ascertment of cost
2. Deciding selling price
3. Assisting Management in decistion makinh
4. Cost control
5. Cost reduction
9. Advantages of cost accounting
174
Measuring and Improving Efficiency
Identification of Unprofitable Activities
Fixing Prices
Price Reduction
Control over Stock
Evaluates the Reasons for Losses
Aids Future Planning
Price Reduction
10. Management accounting
174
1. Management accounting is an extension of management
aspects of cost accounting. It provides the information to
management so that planning, organizing, directing and
controlling of business operations can be done in an orderly
manner.
2. Advantages of Management accounting
Decision Making
Planning
Controlling business operations
Organizing
Understanding financial data
Identifying business problem areas
Strategic Management
11. Classification of cost by Nature or Element
174
Nature or
element
Material
cost
Direct material
Indirect
material
Labour
cost
Direct labour
Indirect labour
Expences
Direct Expences
Indirect expences
Overheads
All Indirect
costs
12. Material Cost
174
• Cost of materials used for the manufacture of a product, a
particular work order, or provisionof a service.
• Example: Cloth for making a dress, stores used for
maintaining machines and buildings such as lubricants,
cotton waste, bricksetc.
13. • The costof labour is the sum of all wages paid toemployees, as
well as the costof employee benefits and payroll taxes Paid by an
employer.
• Example : The costof labor to run the machinery is a variable
cost, which varies with the firm's level of production. The
contract with an outside vendor to perform repair and
maintenanceon the equipment, and that is a fixedcost.
Labour Cost
14. • Expense is defined as money expended or cost incurred in a
firm's efforts to generate revenue, representing cost of doing
business.
• They may be in the form of actual cash payments (such as wages
and salaries), a computed 'expired' portion (depreciation) of an
asset, or an amount taken out of the firm's earnings (such as
bad debts).
• Whereas all expenses are costs, not all costs (such as those
incurred in acquisition of income generating assets) are
expenses.
Expences
