Wells banana accounting department
Accounting system can be interpreted as a part of cost management system of an organization.Ĭost management is not cost reduction alone.
But the cost accounting system and the reports it generates is not the cost management system. Information from accounting systems help managers in cost management activities. All these activities come under cost management. Managers have to take decisions regarding use of materials, processes, product designs and have to plan costs or expenses to support the operating plan for their department or section. Its focus is measuring and reporting financial and nonfinancial information that is related to the cost of acquiring or consuming resources by an organization.Ĭost management is an activity of managers related to planning and control of costs. Executive compensation is tied to profit figures reported in the financial statements and equity share valuation is also based to a large extent on these financial statements.Ĭost accounting provides information to facilitate both management accounting and financial accounting. If focuses on routine and nonroutine accounting reports.įinancial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP). Management accounting as a discipline focuses on accounting information that facilitates decision making by managers of the organization. Horngren’s distinction between them is interesting. Accountants combine these data items in various ways to provide information to internal or external users.ĭistinction Between Financial Accounting, Cost Accounting and Management Accounting While the reports are prepared in different formats and basic data is manipulated or summarized in various ways to facilitate decision making, there is one data base maintained by the accounting system that contains data in the form debits and credits to various accounts maintained in the accounting system. Nonroutine internal reporting: This information or reports are generated to support projects and other decisions that come up as the need arises from them. Routine internal reporting: These reports which are periodically generated are used by managers of the company for their internal decisions.ģ. External reporting: These reports are used investors, creditors, government authorities, and other outside parties.Ģ. Accounting is a major means of helping managers of an organization, equity investors of an organization, potential equity investors, creditors and bond holders of an organization, potential creditors and bond holders of an organization, suppliers and customers of an organization and other stake holders to take decisions.Īccounting provides information for three major purposes:ġ.