MODUL PERKULIAHAN
Cost Accounting
Management, the controller & Cost accounting
Fakultas / Program Studi / TatapMuka / Kode MK / DisusunOleh
Economic and Business / Accountancy / 01 / 84031 / Alfiandri, MAcc
Abstract / Course Competency
Cost accounting provides information for management accounting and financial accounting. Cost accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization / After completing this module, the student should be able to
  1. Understand role controllers in planning and control
  2. Understand the differentiation between management accounting and financial accounting
  3. Understand what professional ethic mean to management accountant

Pembahasan

1.Introduction

All businesses are concerned about revenue and cost, weather their products are automobile, fast food or retails. The managers must understand how revenues and costs behave with the products. Managers use cost accounting information to make decision related to strategic formulation, research development, budgeting production planning and pricing. Basically, the management of the firm consist of three groups namely, operating management i.e., supervisor, middle management i.e., head of department and finally, executive management i.e., president, vice president.

Management consist of many activities, including making decision, giving orders, establishing policies, providing work and rewards and hiring people to carry out the policies (Carter 2006). Management sets the objective to be achieved by integrating its knowledge and skills with the abilities of the employee, therefore, planning, organizing and controlling play significant role to achieve the target or objective of the firm.

Planning is to identify alternative and then select from among the alternatives the one that does the best job to achieve organization’s objectives (Garrison & Noreen 2006). According to Carter (2006), Planning, the construction of a detailed operating program, is the process of sensing external opportunities and threats, determining desirable objectives and employing resources to accomplish these objectives. Frankly speaking, Planning is a thing should be set up in advance to achieve the company objective.

There are three kinds of plans identified in the business entities strategic plans, short range plans and long range plans. Strategic plans are formulated at the highest levels of management; it takes the broadest view the objective of the company and its environment. Short range plans often called “budget” which focus short term achievements. That can see on the financial statement monthly, quarterly and yearly. Finally, long range plans, this plan typically set to achieve long term objective achievement such as, earning per share for five years in the future.

Organizing is the establishment of the framework within which activities are to be performed. The terms organize and organizations refer to systematization of interdependent part of unit. This involves people in the organization and not only that integrating between divisions; department or branches are also involved.

Control is acting to ensure planning run on the track. Control and monitor is one packaged that cannot be separated. Control and monitor can be named as cybernetic logic whereby there are set in advance, output is measured, goals and output is compared, feedback is provided and corrections are made if necessary (Henri, 2006)

All of those three things in the management called as “three board management function”.

Authority, Responsibility and Accountability

Authority is the power to direct others to perform or not perform activities. Authority is the key to the managerial job and the basis for responsibility. Responsibility or obligation is closely related to authority. It originates principally in the superior subordinate relationship in that the superior has the authority to require specific work from others. Accountability, report the results to higher authority.

The three board management functions as well as authority, responsibility and accountability depicts in the structure of organization which we find in the organizations. That sample structure of the organization is shown in Figure 1.

Figure 1 – Sample structure of the organization

Figure 1 shows top managements build the plans to achieve organizational objective. Middle managements have been delegate by top management to implement and control (flow of the authority). Low management is operating the plan which they must responsible to top of the line.

2.Financial Accounting, Management Accounting and Cost Accounting

Financial accounting and management accounting have clearly different objectives. Financial accounting focuses on reporting to external parties such as, investors, government, banks and suppliers. It is therefore measure and records business transactions and provides financial statements which comply with generally accepted accounting principle (GAAP). Management accounting on the other hand, measure, analyzes and reports financial and non-financial information that helps managers make decisions to fulfill the goals of an organization. Simple definition, management accounting is concerned provide the information to the managers, that is inside information in the organization to people who direct and control its operations. Furthermore, the information and reports do not have to follow set principles or rules. Usually the questions always arise (1) how will this information help managers do their job better and (2) do the benefits of producing this information exceed the cost?

  • Management Accounting versus Financial Accounting.

The main differences between management accounting and financial accounting are results orientation. Management accounting is prepared the information to internal users i.e., the managers in the organization while financial accounting is prepared the information to external users such as, shareholders and creditors.

Table 1 below shows the distinguish between management accounting and financial accounting

Table – 1 Comparison between management accounting and financial accounting

Table 1 showthe objective of management accounting is for internal users while the objective of financial accounting is external users. Type of reporting for management accounting is frequently which means no specific time to provide the information to the managers and thatdepend on the manager’s needs i.e., daily, weekly or three days once. Type of reporting for financial accounting is regularly basis i.e., monthly, quarterly, semester and yearly. In term of providing the information, it provides for special purpose that leads to specific decision such as cost control of raw materials and controlsthe labors. Financial accounting on the other hand provides the information to external users which aimfor general purpose such as profitability, return on investment and return on assets. Content of report in the management accounting is very detail due to managements need evaluate and measure the quality and quantity of the products while content report in the financial accounting is aggregated. It means the information is accumulated and calculated in specific period. For example, administration expenses in the income statement. It states and reports monthly, semester and yearly. Recording transaction in the management accounting is beyond double entry which is not rely on the debit and credit while recording transaction in the financial accounting is stick with double entry model i.e., debit and credit

  • Role of Cost Accounting

Cost accounting furnishes management with necessary tools for planning and controlling activities, improving quality and efficiency and making both routine and strategic decisions.

The collection, presentation and analysis of information regarding costs and benefits help management accomplish the following task:

  1. Establishing costing methods that permit control of activities, reduction of costs and improvements quality
  2. Controlling physical quantities of inventory and determining the cost of each product or service produced for the purpose of pricing and for evaluating the performance of product, department or divisions.
  3. Determining company cost and profit for annual accounting period or shorter period. This includes determining the cost of inventory and cost of goods sold according the external reporting rules.

For example, calculating the cost of a product is a cost accounting function that answers financial accounting’s inventory-valuation needs and management accounting’s decision-making needs (such as deciding how to price products and choosing which products to promote).

Modern cost accounting takes the perspective that collecting cost information is a function of the management decisions being made. Thus, the distinction between management accounting and cost accounting is not so clear-cut, and it often uses these terms interchangeably in the book

  1. Budgeting

The budget is the quantified, written expression of management’s plans. All levels of management should be involved in making it. A workable budget promotes coordination of personnel, clarification of policies and crystallization of plans.

Budgeting plays an important role in influencing individual and group behavior at all stages of the management process including:

  1. Setting goals
  2. Informing individuals about what they should contribute to accomplishment of the goals
  3. Motivating desirable performance
  4. Evaluating performance
  5. Suggesting when corrective action should be taken
  1. Controlling cost

Controlling cost is one of the objective in the budgetary and it should be assigned to specific individuals who are responsible for the budgeting the cost under their controls. Each manager’s responsibilities should be limited to the costs and revenues that are controllable by the managers. Furthermore, the performance measures by comparing actual costs and revenues with the budget.This system calls “responsibility accounting system”

In order to control the costs, the cost accountants uses predetermined cost amount and this called “Standard Cost”

  1. Determining Profits

Determining profit is determined by matching principle which is revenue match with the costs. The matching process involves identifying both short run and long run costs and variable and fixed cost.

Variable cost assigns to the unit manufactured and match with revenue when those units are sold. Fixed cost at the same time consider as the cost that spend during the period also match with the revenue in the period. That is determining profits.

DaftarPustaka

Henri, J.F. 2006b. Organisational culture and performance measurement systems. Accounting, Organisations and Society 31, 77-103

William K. Carter & Milton F. Usry, (2008).Cost Accounting. 14th Edition, South-Western Publishing Co

2014 / 1 / Cost Accounting / PusatBahan Ajar dan eLearning
Alfiandri, MAcc /