Cost Accounting

Traditions and Innovations

Barfield, Raiborn, Kinney

Chapter 1
Introduction to Cost and Management
Accounting in a Global Business
Environment

Learning Objectives (1 of 3)
Explain the relationship between financial and
management accounting
Describe the relationships among cost,
financial, and management accounting
Describe the role of ethics in guiding
workforce behavior
Identify the factors that influence the
globalization of business

Learning Objectives (2 of 3)
List the primary factors and constraints that
influence an organizations strategy
Explain the impact of the competitive
environment on an organizations strategy
Clarify the impact of the accounting
function on achievement of strategic goals
and objectives

Learning Objectives (3 of 3)
Explain the effect of the product life cycle
on the company segments mission
Describe the importance of the value chain

Accounting
The
Language
of
Business

Accounting
Provides information to external parties
Stockholders, creditors, regulators

Estimates the cost of products produced and

services provided
Provides information to internal decision makers
To plan, control, and evaluate performance

Two Types of Accounting

Financial

Management

Meet external
information needs
Comply with GAAP

Meet internal
information needs
Provide product
costing information

Financial Accounting Should

Provide information to
stockholders, creditors, and
various regulatory bodies

Comply with GAAP

Management Accounting Should

Provide product costing information
for external financial statements
Provide information
useful for
making decisions
and controlling
operations

Accounting Differences
Financial

Managerial

External
Aggregated
Historical
Quantitative
Monetary
Verifiable
GAAP

Internal
Segmented
Current/Forecasted
Quantitative/Qualitative
Monetary/Nonmonetary
Timely/Reasonable estimate
Benefits exceed costs

Relationship of Financial,
Management, and Cost
Accounting

FINANCIAL
ACCOUNTING

COST
MANAGEMENT
ACCOUNTING ACCOUNTING

Accounting Standards
Financial

Management

Financial Accounting
Standards Board
(FASB)
Private-sector body

Cost Accounting
Standards Board
(CASB)
Public-sector board

Accounting Organizations
Institute of Management
Accountants (IMA)
Statements on Management
Accounting (not legally
binding)
Certified Management
Accountant (CMA)
Certified in Financial
Management (CFM)

Society of Management
Accountants of Canada
Management Accounting
Guidelines (not legally
binding)

Ethics & Management Accountants

Standards of Ethical Conduct for
Management Accountants

Competence
Confidentiality
Integrity
Objectivity

Competence
Confidentiality
Integrity
Objectivity

Global Business Environment

International trade of goods

and services
International movement of
labor
International flows of
capital and information

Global Business Challenges

Understand the factors influencing
international business markets
Devise a long-term plan to achieve
organizational goals
Develop information systems that keep the
companys operations consistent with its
plans and goals

Global Business Environment

Electronic Commerce
Trade Agreements
North American Free Trade Agreement
(NAFTA)
General Agreement on Tariffs and Trade
(GATT)

North American Free Trade

Agreement (NAFTA)
Members agreed
to allow duty-free
transfer of goods
under certain
conditions

General Agreement on
Tariffs and Trade (GATT)
To provide a level playing field for
trade among the 100+ signatory nations

Global Business Environment

Risks
Strategic
Environment and Organization

Operating
Financial
Information

Global Business Environment

Ethical Considerations

Is it legal?
Does it comply with our values?
How will it look in the newspaper?
If you do it, will you feel bad?

If its wrong, dont do it.

If youre not sure, ask.

Goals and
Objectives

Organizational
Strategy

Strategic
Planning
Tactical
Planning

Organizational Strategy

Organizational Structure
Core Competencies
Organizational Constraints
Organizational Culture
Environmental Constraints

Organizational Strategy
Organizational Structure

Centralization

Decentralization

Organizational Strategy
Organizational Structure
Core Competencies

A higher proficiency than the competitors

Technological innovation
Engineering
Product development
After-sale service

Organizational Strategy
Organizational Structure
Core Competencies
Organizational Constraints
Monetary Capital
Intellectual Capital
Human Capital
Structural Capital
Relationship Capital

Organizational Strategy

Organizational Structure
Core Competencies
Organizational Constraints
Organizational Culture
An organizations norms
internal and external
formal and informal

Organizational Strategy

Organizational Structure
Core Competencies
Organizational Constraints
Organizational Culture
Environmental Constraints
Limitations on strategy caused by external
differences in culture, competitive market
structures, fiscal policy, laws, or political situations

Business Intelligence System

Formal process for gathering and analyzing
information and producing intelligence to
meet decision-making needs
Information about internal processes
Knowledge of markets, technologies,
and competitors

Business Intelligence

Competitive Intelligence

Competitor
Analysis

Levels of Intelligence Gathering

Business Segments
Segment Mission relates to Product Life
Cycle
Build
Hold
Harvest

Accounting Information
Strategic Resource Management
Planning for deployment of resources to create value
for customers and shareholders

Value ChainFoundation of SRM

Set of processes that convert inputs into products and
services

Use accounting information to evaluate the value

chain to improve strategic resource management

The Accountants Role

Accountants provide information that is used to

make strategic decisions

measure and evaluate management
provide appropriate incentives
provide information about the value chain

Questions
What is the relationship among cost,
financial, and management accounting?
How do ethics guide workforce behavior?
What is the impact of the accounting
function on achievement of strategic goals
and objectives?