This chapter introduce the management accounting: basic terms and concepts. The contents of this chapter includes: Management accounting information, conventional vs. contemporary management accounting systems, emphasis on cost, cost classifications, cost behaviour,. Inviting you refer. | Chapter 2 Management accounting: basic terms and concepts Management accounting information Components Costing system Budgeting system Performance measurement system Cost management system Conventional versus contemporary approaches Conventional vs. contemporary management accounting systems Emphasis on cost Why do management accountants pay so much attention to costs? Historic focus on production costs, to value inventory and COGS for external reporting Ready availability of cost data within the transaction-based accounting system Importance of cost information in managers’ decisions Non-financial information has assumed increased importance in contemporary management accounting systems Cost classifications Before classifying costs, need to consider how managers intend to use the cost information in decision making Different cost and classifications are used for different purposes The same cost can be classified in a number of ways depending on the intended use of the . | Chapter 2 Management accounting: basic terms and concepts Management accounting information Components Costing system Budgeting system Performance measurement system Cost management system Conventional versus contemporary approaches Conventional vs. contemporary management accounting systems Emphasis on cost Why do management accountants pay so much attention to costs? Historic focus on production costs, to value inventory and COGS for external reporting Ready availability of cost data within the transaction-based accounting system Importance of cost information in managers’ decisions Non-financial information has assumed increased importance in contemporary management accounting systems Cost classifications Before classifying costs, need to consider how managers intend to use the cost information in decision making Different cost and classifications are used for different purposes The same cost can be classified in a number of ways depending on the intended use of the cost information continued Cost classifications What are costs? Resources given up to achieve a particular objective If the benefit extends beyond the current accounting period these costs are classified as assets If the benefit is used, the costs are classified as expense Measured in monetary terms Cost behaviour Managers must understand how costs change as the as the level of activity in the business changes The level of activity is the level of work performed in the organisation Variable costs Change in total in direct proportion to a change in the level of activity Sometimes referred to as unit-level costs in product costing as they incurred for each unit of product/service produced continued Cost behaviour Fixed costs Remain unchanged in total despite changes in the level of activity Can be described as committed costs Result from an organisation’s ownership or use of premises and its basic organisation structure, and is difficult to change in the short-term or as .
