ALL COST ARE MANAGEMENT ACCOUNTING
CHAPTER ONE: INTRODUCTION
- Background to the study
Management accounting collects data from cost accounting and financial accounting. Thereafter, it analyzes and interprets the data to prepare reports and provide necessary information to the management. On the other hand, cost books are prepared in cost accounting system from data as received from financial accounting at the end of each accounting period. In management accounting or managerial accounting, managers use the provisions of accounting information in order to better inform themselves before they decide matters within their organizations, which aids their management and performance of control functions.
One simple definition of management accounting is the provision of financial and non-financial decision-making information to managers. According to the Institute of Management Accountants (IMA): “Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy”.Management accountants (also called managerial accountants) look at the events that happen in and around a business while considering the needs of the business. From this, data and estimates emerge. Cost accounting is the process of translating these estimates and data into knowledge that will ultimately be used to guide decision-making.
The Chartered Institute of Management Accountants (CIMA), the largest management accounting institute with over 100,000 members describes “Management accounting as analysing information to advise business strategy and drive sustainable business success”.
Cost accounting is an input into management accounting. Cost accounting focuses on understanding and optimizing costs in a complex business environment. Management accounting focuses on the bigger picture of using data to make planning and strategy decisions for the company.Cost accounting tracks and analyzes costs, including material, labor, overhead and time, for every activity performed in producing and delivering goods and services. This information can be used to improve efficiencies and reduce overall cost.
The objective of management accounting is to collecting data to prepare budgets for organizations. The purpose of management accounting system is to properly use the management accounts to achieve the organizational objective. The management control system is very broad term it not only controls the management accounting system but also control the personal and groups issues.
Management accounting control system highly influences the business environment. The role of management accounting control system providing the information to accountant and control managers for planning, controlling and measuring the performance in the organizations. The important changes in the environment are highly influences by management accounting control system. Without effective management accounting control system no organization can be flourishing.
- Statement of the Problem
In recent years, the cost of products in Nigeria has been very expensive beyond the reach of common Nigerians. This cost challenges has made many products manufactured in the country un patronized by the consumers, and as a result of that expires in the hands of the sellers. Management accountants are assigned with managing cost elements of products among other responsibilities. He aligns cost with efficiency; provide required information for cost minimization so that profit could be maximized. In making a sound decision the management needs some valuable and accurate information from the accountant. The accountant is at the services of the management by providing the management with the necessary information which they need for decision making. In recent times, it was observed that cases of mismanagement, fraud and irregularities prevail in the organization.
- Research Questions
In attempt to achieve the objective of this study, the research seeks to find answer to the following research question:
- Are all cost management accounting?
- What is the difference between cost accounting and management accounting?
- Objectives of the study
The aim of this research is ascertain whether all costs are management accounting. The specific objectives of this study are;
- To determine whether all cost are management accounting.
- To identify the difference between cost accounting and management accounting.
- Statement of Hypotheses
The following are the hypothesis which this research tries to test:
H0: All cost are management accounting
H1: All cost are not management accounting
- Significance of the study
The management accounting makes the necessary information available to the management. The significance ofthis study is to bring to the notice of the management the exemplary role of the management accounting and the technique used to provide information and also how these would affect the operations and the attainment of the organizational goal if these information provided are not recommended for use by the management. And with such knowledge and information put to use, management would be able to plan and control the organization such that the cost of operating the business will be at a minimum while profit will be maximized.
Finally, this work will be of immense help to students, researchers and scholars as it will open a new area of study for further research and also form a basis for view of related literature.
- Scope of the study
The scope of this research is on the examination of cost and management accounting with the sole aim of determining whether all cost accounting are management accounting.
- Limitations of the study
In the process of carrying out this research work, the most nagging problemfacing the study is how to obtain reference materials. The time to carry out the research is short and insufficient, since it is done alongside with some other courses to contend with so as to present a good result.
- Definition of Terms
Accountant: An accountant is a practitioner of accountancy or accounting (referred as an accounting in the united states), which is the measurement,disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources.
Management Accountant: are those key officers that provide business data andanalysis to managers within organizations to assist in decision making andcontrol.
Profit maximization: A process that companies undergo to determine the best output and price levels in order to maximize its return. The company will usually adjust influential factors such as production costs, price of goods and output level as a way of reaching its profit goal.
Performance; General accomplishment of a given task measured against present standards of accuracy, completeness, cost and speed.
Management: This is defined as the process of dealing with or controlling things or people. It is the responsibility for control of a company or similar organization.
Information: this means data that is accurate and timely, specific and organized for a purpose, presented within a context that gives it meaning and relevance, and can lead to an increase in understanding and decrease in uncertainty. Information is valuable because it can affect a decision or an outcome. For e.g., if a manager is told, his company’s’ net profit decreased in the past month, he may use this information as a reason to cut financial spending for the next month.
Decision making: The thought process of selecting a logical choice from the available option. It is done to achieve a specific objective or solve a specific problem
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