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All accounting systems are designed to provide information to people who take decisions. Either way, it is desirable to classify accounting systems based in the primary user of the information. Investors (or potential investors), creditors, government agencies, tax authorities and others are outside the organization. Managers are within the organization. The classification of accounting systems in financial and cost (or managerial) systems capt this distinction between the people making decisions.
Information in financial
accounting is designed for decision makers and who are not involved
in the daily management of the company. These users are
commonly outside the company. The information, at least for public companies,
is public and typically available on the website of the companies. Managers
at the company are seriously concerned at reports that generates the
financial accounting, but anyway, the information is insufficient for
making operational decisions of the company.
Cost accounting information is designed for managers. Since managers are taking decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, the important criterion is that the information must be relevant to decisions that managers operating in a particular environment of business including strategy make. Cost accounting information is commonly used in financial accounting information, but first we are concentrating in its use by managers to make decisions. The accountants who handle the cost accounting information and generate add value by providing good information to managers who are taking decisions. Among the better decisions, the better performance of your organization, regardless if it is a manufacturing company, a bank, a non-profit hospital, a government agency, a school club or even a business school. The cost-accounting system is the result of decisions made by managers of an organization and the environment in which they make them.
COST ACCOUNTING AND THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
financial accounting is to provide investors (such as shareholders) or
creditors (e.g. banks) information about the company and the
performance of the administration. The
financial information prepared for this purpose is governed by the Generally
Accepted Accounting Principles (GAAP), which provide consistency in
the accountancy data used for purposes of reporting from a company to
means that the information of cost accounting used to calculate the
cost of goods sold, inventory valuation, accounting and other financial
information used for external reports should be prepared in accordance
CLIENTS OF COST ACCOUNTING
participants in a business to whom the administration must consider,
the most important is the customer. Without
customers, the organization loses its ability and reason to exist;
customers provide the approach to the organization.
COST ACCOUNTING AND ETHICS
design of costing systems is ultimately about the allowance of costs to
various activities, products, projects and corporate units, and people.
manner in which this is done affects prices, reimbursement and payment.
As some already know, based on events, the cost accounting systems
design has the potential to be misused and fraud to customers,
employees or shareholders. As user or preparer
of the cost information, you need to be aware of what it implies how
the information is used. And most important,
you need to be aware of when
the system has the potential to be abused.
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