Month: February 2021

DEFINITIONS  Budget (A plan in money) A budget is defined as: “A plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and/or expenditure to be incurred during Read More …

INTRODUCTION  Planning and Control One of the principal objects of any management accounting system should be to assist in the planning and control of operations.  The techniques of budgetary control and standard costing can help management carry out this vital Read More …

INTRODUCTION Accountants have an important role in the preparation of relevant data for decision making purposes. For decision making purposes information is required which is relevant to the particular decision under consideration.  In all decisions there must be a “status Read More …

BREAK-EVEN ANALYSIS For any business there is a certain level of sales at which there is neither a profit nor a loss, i.e. the total income and the total costs are equal.  This point is known as the break-even point.  Read More …

INTRODUCTION In previous study units we have considered only costing systems that arrange for all costs to be included in or absorbed into individual costs, i.e. absorption costing.  This approach aims at identifying the total cost of an activity or Read More …

OPERATING COSTING  The Method Described Those organisations which provide a service to their customers use this method to establish the costs of their service.  The service is regarded in the same way as the process is regarded in process costing Read More …

APPLICATION AND GENERAL PRINCIPLES  Application Until now we have been considering organisations with a cost unit which can be segregated, and have direct expenses wholly attributed to it.  Other types of organisation produce output in which a unit cannot be Read More …

INTRODUCTION  Service costing is defined as “cost accounting for services or functions, for example canteens, maintenance and HR. These may be referred to as service centres, departments or functions”.  Service industries are different to manufacturing in that their outputs are Read More …

INTRODUCTION In management accounting systems, costs are usually accumulated to meet both external management needs and external reporting requirements. Examples of these are: – Internal Management Needs: – Pricing decisions Determining Product Range Performance of departments External Reporting Requirements – Read More …

EXAMPLES OF EXPENSES So far we have examined two of the components of cost, namely labour and material costs.  The third cost element is expenses, which comprises all items not falling within the other two categories.  Examples therefore include rent, Read More …