Part 2 book “Accounting principles II” has contents: Managerial and cost accounting concepts, traditional cost systems, activity-based costing, cost-volume-profit relationships, incremental analysis, capital budgeting, flexible budgets and standard costs, budget. | CHAPTER 8 MANAGERIAL AND COST ACCOUNTING CONCEPTS Financial statements are used by both external users and internal management and provide general information about the entire company. For example, the balance sheet reports total inventories and the income statement reports cost of goods sold, but the costs of individual products are not disclosed to the public. Internal management needs detailed information to make decisions about its business. A comparison of managerial and financial accounting shows the differences between the two sets of information. Managerial and Financial Accounting Comparison Managerial Accounting Financial Accounting Users Internal managers Creditors, investors, analysts, and other external users Guidelines for preparation Flexible GAAP—rigid Purpose Decision making and control information General information for credit and investment decisions Frequency of preparation As needed Annually and quarterly Independent opinion None required Auditor’s opinion Type of information Specific to project or management action— may be detailed and include estimates General purpose— very few estimates ACCOUNTING PRINCIPLES II 147 MANAGERIAL AND COST ACCOUNTING CONCEPTS Manufacturing Financial Statements Manufacturing companies have several different accounts compared to service and merchandising companies. These include three types of inventory accounts—raw materials, work-in-process, and finished goods—and several long-term fixed asset accounts. A manufacturing company uses purchased raw materials and/or parts to produce a product for sale. At a point in time, the company’s inventories consist of raw materials, those materials and parts waiting to be used in production; work-in-process, all material, labor, and other manufacturing costs accumulated to date for products not yet completed; and finished goods, the cost of completed products that are ready to be sold. The value of each type of inventory is disclosed in a company’s .
