Management and Cost Accounting

ACCA F5 - Performance Management 

ACCA F2 - Management Accounting

Though management and cost accounting is not mandatory (not legally enforced), the importance of management accounting is escalating in present vibrant and turbulent business environment. Generally, everyone knows organisation use cost accounting to enhance the productivity and profitability and government use it to levy taxes in imports and exports. Cost and management accounting liaise with financial accounting and financial management. Cost and management accounting is also significant to understand managerial economic.

The recent changes in information and technology have revolutionized the concept of cost and managerial accounting. It has increased the foreseeability of managers and increased efficiency providing management with latest managerial tools. Managerial information system and advanced real time data handling programs has increased efficiency and challenges in managerial role. 

Traditional managerial concept of market as push mechanism is now no longer relevant in every economy (national and geographical boundary). However, somewhere in places because of highly uneven wealth distribution they do exist. Global market has adopted market pull strategy and is operating in environment where there is rapid innovation of product. Consumer are demanding highly customized and integrated product in affordable price, which has increased challenge to managers to drive down the cost of production.

The role of managerial and cost accounting does not end defining the unit cost of production. Optimum production level, the market demand, pricing policies, breakeven point, cost tied in the project, opportunity cost, future earning prospect of the product, analyzing increase in price of the product with added feature, variance analysis, budgeting and many more task surrounds the role of manager.

Today manager need to know the activities that drives cost of product. There can be in-house activities or the open market activities, which will pull or push the price of parts/products. Proper managerial decisions help shrunk the cost and skim the profit.

Cost accounting starts from recording in-house data, gathering data from external source and calculating cost of specific product. Then, it extends as managerial accounting to maximizing profit, maximizing value, maximizing sales revenue and satisfying customers. This way, analyzing increased profit because of managerial discretion and recognizing business profit and economic profit connects cost accounting with managerial economics.

The terms 'cost accounting' and 'management accounting' are often used to mean the same thing.