Cost Accounting
Atiq ur Rahman
Mardan Institute of Management Studies
Chapter 1 page 1 to 8
Executive Management e.g. President, CEO Director Finance Director Marketing Chief Production Manager e.g. Department Heads Chief Accountant etc Division Managers Branch Managers etc
Middle Management
Operating Management
e.g. Foremen Supervisors etc
Activities must be planned and controlled through top level directives, decisions and instructions
Planning is basically an executive level management responsibility
Control requires participation of all levels of the management team
Management sets objectives and tries to accomplish them through people it directs
It looks toward a final goal through a series of steps and processes
Management keeps itself aware of the tasks of carrying out the objectives
Management Achieves Objectives
With the help of all employees
Through Planning and Controlling
PLANNING
Sensitizing external opportunities and threats
Determine desired and possible objectives
Deploy resources to match the objectives
PLANNING
Without planning there is no basis for controlling
Planning is looking ahead
Involves choice of several alternatives
Planning must precede doing
PLANNING
Budget is a type of plan
Budget is a link between cost accounting and management
Budget is also used for controlling
Budget consists of quantitative data
PLANNING
To prepare Budget and any other type of corporate plan All departments should participate. No single department should plan and act individually.
PLANNING
Planning leads to determination of objectives. Profit maximisation is not the only objective.
CNTROLLING
Compare performance to plans
Need of control increases with size and complexity
Budgets are boundaries
If boundaries are crossed action is taken
CNTROLLING
Leading To New Decisions
Board of Directors President / Manager
Issues: Reports Graphs Charts
Setting Objectives And making Policy Decisions Decisions Plans and Instructions to Departments
Departments Finance Production
Marketing
Results Data Assembled in Cost and/or Budget
CNTROLLING
In small companies planning and control activities Are performed by one person Owner or GM performs this task
Because of intimate knowledge
CNTROLLING
Executive management is responsible for controlling Because of limited time authority and responsibility may be delegated to lower levels
Authority originates at top level and delegated To lower levels
CNTROLLING
Authority is the binding force And power to performance
CNTROLLING
The essence of Responsibility is obligation Authority can be delegated but Responsibility can not be delegated Responsibility leads to 1 Securing results 2 Accountability
CNTROLLING
Accountability means reporting results. The reporting phase is a function of 1 budgetary control and 2 standard costing Organisations should avoid duality It nullifies accountability
ORGANIZING
Establishment of framework for performance
Organizing is extracted from “organs”
Organization involves establishment of Divisions, departments, sections and branches etc
LINE and STAFF ORG.
Shareholders
BOD
President
Secretary
VP Marketing
VP Manufacturing
VP R & D
Treasurer
Controller
Manager Production
Manager Plant Eng.
FUNCTIONAL ORG.
ACCOUNTING
Framework for planning and controlling
Management needs to effectively use the capital
Budget is the result of planning And essential for controlling
ACCOUNTING
Accounting is a way of communicating financial data