8/10/2019 Mgt Acc Lecture 1

1/15

Lecture 1

Tahmina Ahmed

Lecturer

Department of Humanities

Bangladesh University of Engineering & Technology (BUET)

8/10/2019 Mgt Acc Lecture 1

2/15

Accounting is the process ofidentifying,

recording,

classifying andsummarizingfinancial transactions

--------toproducethe financial reports for theirultimate use.

8/10/2019 Mgt Acc Lecture 1

3/15

Branches of Accounting

Financial Accounting

Cost Accounting

Managerial Accounting

8/10/2019 Mgt Acc Lecture 1

4/15

Process of gathering, organizing, and

Communicating financial information

Financial

Statements

Accounting Information System

8/10/2019 Mgt Acc Lecture 1

5/15

Users of Accounting Information

Internal managers

Creditors:

SuppliersBankers

Day-to-day operating decisions

Long-range strategic decisions

ManagementAccounting

Financial Accounting

External Users

Government Authorities

Investors: Stockholders

8/10/2019 Mgt Acc Lecture 1

6/15

Comparison of Financial andManagerial Accounting

Financial Accounting Managerial Accounting1. Users External persons who Managers who plan for

make financial decisions and control an organization

2. Time focus Historical perspective Future emphasis

3. Verifiability Emphasis on Emphasis on relevance

versus relevance verifiability for planning and control

4. Precision versus Emphasis on Emphasis on

timeliness precision timeliness

5. Subject Primary focus is on Focuses on segments

the whole organization of an organization

6. GAAP Must follow GAAP Need not follow GAAP

and prescribed formats or any prescribed format

7. Requirement Mandatory for Not

external reports Mandatory

2-6

8/10/2019 Mgt Acc Lecture 1

7/15

Management Accounting Challenges

Shift from a manufacturing-based

to a service-based economy

Increased global competition

Advances in technology

Changes in business processes

8/10/2019 Mgt Acc Lecture 1

8/15

Business process reengineering:

Just-in-time (JIT) philosophy

Lean manufacturingComputer-integrated manufacturing

Advances in Technology

E-commerce

Enterprise resource planning (ERP)

8/10/2019 Mgt Acc Lecture 1

9/15

Management of COST

8/10/2019 Mgt Acc Lecture 1

10/15

Sacrificed resource to achieve a specificobjective.

In accounting, cost is defined as the cashamount (or the cash equivalent) given up for an

asset. Cost includes all costs necessary to get

an asset in place and ready for use.

Example: Inventory purchase price plus freight-

in.

Whats Cost?

8/10/2019 Mgt Acc Lecture 1

11/15

Whats Cost Accounting?

Cost accounting is concerned with COST. It

includes not only CALCULATION of cost

rather MANGEMENT of COST.

CALCULATION: determination of costs of

products or services by

- recording

-classifying

-summarizing costs

8/10/2019 Mgt Acc Lecture 1

12/15

MANAGEMENT

-Planning

-Controlling

-Furnishing of information to management for

decision making.

Whats Cost Accounting?

8/10/2019 Mgt Acc Lecture 1

13/15

Two-fold FunctionCost Accounting to Financial

Accounting

Calculation and reporting of

-Cost of goods sold and

-Finished goods, work in process, and rawmaterials inventory

8/10/2019 Mgt Acc Lecture 1

14/15

Cost Accounting to ManagementAccounting

-Budgeting-Make or buy decision, keep or replace decision

-Determination of selling price.

-Resource allocation

-Cost of defectives and defect rates,performance measurement etc.

Two-fold Function

8/10/2019 Mgt Acc Lecture 1

15/15

End of Lecture 1