What is Cost and Management Accounting Video Lectures - CMA Foundation

What is Cost and Management Accounting Video Lectures - CMA Foundation

INTRODUCTION TO COST AND MANAGEMENT ACCOUNTING

Cost and management accounting is a type of accounting that aims to maximize profit by managing revenues and expenses and providing data and reports that managers can use to inform their long-term profit and growth goals and objectives.

 

Meaning of Cost

Cost is the monetary value of the utility that has yet to be obtained from the resources employed by the company to generate revenue. In plain terms, the cost is the benefit we expect to receive in the future from an asset or assets, whether we use them for business purposes or sell them in an arm's length transaction.

 

WHAT IS COST ACCOUNTING?

Essentially, cost accounting is the act of monetizing outflows of cash or losses of advantages in relation to a certain part of the business for which the user requires information that is primarily used in the decision-making process. It is a type of cost accounting that spans three time periods: past, now, and future. It aids in the proper processing of historical data and can also be of great use in future planning, such as budgeting and various analyses.

 

Cost accounting is concerned with the computation and evaluation of costs and expenses incurred in the purchase or production of a product. It has to do with calculating cost per unit utilizing various costing approaches.

 

Cost accounting is defined as the process of determining and controlling costs that begins with the recording of revenue and expenditure or the bases on which they are computed and ends with the preparation of periodic statements and reports.

WHAT IS MANAGEMENT ACCOUNTING?

Management accounting relates to the provision of relevant information for decision-making, planning, cost control, and performance evaluation. Management accounting is one step further than cost accounting. It works to know the reasons of profit or loss and studies the factors which influence efficiency to help in decision making. Management accounting is an open-ended discipline that enables managers to make better and accurate decisions.

 

The main characteristics of management accounting are:

• Helps in decision making
• Future-oriented
• No set format for disclosure of the information
• It is discretionary activity and not a compulsory activity
• Provides both quantitative and qualitative information

 

The Role of Cost and Management Accounting is as follows:

To provide material information to management for decision-making.

To assist management in planning, measurement, evaluating, and controlling of business activities.

To help in allocation of cost to products and inventories for both external users (e.g. auditors, shareholders, creditors, regulatory authorities, etc.) and internal users (e.g. managers, employees, etc.)

 

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