Hello Lawyer. My name is Quang Anh, looking forward to the lawyer’s answer to the question: How is the cost of management accounting understood? How many types of management accounting costs? What is the nature and goal of cost management accounting? Thank you very much.
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What is management accounting?
According to the management accounting textbook of the National Economics University in 2014 edited by Assoc. Prof. Dr. Nguyen Nang Phuc:
“Management accounting is a specialized accounting tool to carry out the process of identifying, measuring, synthesizing and communicating useful information, helping corporate governance to perform well the planning functions, check, evaluate and make decisions in management”.
It can be understood that management accounting is an integral part of the enterprise accounting system. The collection, processing and design of information by management accountants must come from the requirements of each different governance object within the enterprise.
Management accounting was born due to the increasing demand on the quantity and quality of information to meet the management requirements of the growing economy.
What does management accounting cost?
Management accounting cost concept
Management accounting costs are a part of management activities, which is the process of identifying, measuring, recording and providing information about the costs of economic activities of an organization.
From the perspective of management accounting, the cost accounting department has the function of measuring and analyzing costs and providing information to evaluate the profitability of products, services, activities and parts of the organization to improve the efficiency and effectiveness of business processes.
Management accounting costs can be understood as a part of the management accounting system to provide cost information for each organization to perform its management functions, including planning, controlling, evaluating operations and make reasonable decisions about the activities of the entity.
The nature of management accounting costs
Cost management accounting provides cost information for managers in planning, cost control, decision making and performance evaluation.
The information provided is both specific and honest and comes from the needs of managers, so it is very useful for corporate governance.
Information provided by management accounting costs can be financial or non-financial.
Management accounting costs exist together with financial accounting in the enterprise accounting system, which can be organized in combination with or separately from the financial accounting system.
Reports of management accounting expenses provided to managers are provided periodically or when the need arises.
The forms of management accounting costs are not mandatory or legal but depend on each specific case.
Unlike financial statements provided by financial accountants, which must be legal and uniform for all businesses, cost management accountants provide reports to serve the requirements of management, so these reports are set up appropriately and satisfy the needs of managers in each specific enterprise without having to follow any general principles.
Classification of management accounting costs?
Cost in management accounting is very important when considering how to calculate and transfer costs to determine profit in each accounting period, including 2 types: product costs and period costs.
Product cost
Product costs include the costs incurred in connection with the production of the product. Therefore, these costs combine to create the value of the product formed through the production stage (called production cost or factory cost).
Items cost of raw materials, direct materials, direct labor costs, and manufacturing overheads belong to product costs. Considering the relationship with the determination of profit in each accounting period, product costs are only calculated and carried forward to determine the profit in the accounting period corresponding to the volume of products sold in the accounting period there.
The cost of unsold inventory at the end of the period will be kept as inventory and will be carried forward to determine profit in the periods after they are sold.
Therefore, product cost is also known as inventory able cost.
Period cost
Period costs include the remaining cost items in addition to the cost items of product costs (sales and administrative expenses).
Period costs incurred in any accounting period are considered to be effective for the business process of that period. They are carried forward to determine the income in the accounting period in which they are incurred.
Period costs are also known as non-inventory costs.
Objectives of cost management accounting
The goal of cost and cost management accounting is to determine the costs the business needs to use to operate as well as to study the pricing strategy of products and services to provide internal information to serve customers’ management purposes.
Therefore, cost management accounting is an important basis to help business administrators make accurate and reasonable decisions.
There are some limitations of cost management accounting in enterprises as follows:
Cost management accounting in general and the process of setting up cost management accounting models, in particular have not been really interested in businesses. The importance of management accounting has not been emphasized, leading to ineffective business management and business management strategies.
The application of cost management accounting is only at the beginning. In other words, it is simply a link between financial accounting and management accounting.
Currently, most businesses only organize financial accounting apparatus, while the management accounting apparatus, specifically cost management accounting, has not been really invested.
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Frequently asked questions
Cost management accounting has the functions of reflecting and providing information on planning activities and results of production and business activities; inspect and evaluate production and business activities and serve for the management decision-making of managers within the enterprise.
Benefits of the standard cost management accounting method:
Provide standards for managers to compare and compare with actual costs.
Motivating employees to save costs in production.
Cost data, more stable prices.
Compared to the actual costing system, the accounting system is simpler.
Conclusion: So the above is Cost of management accounting in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
