Cost Accounting Systems:1 Concepts, Classifications and Behaviors
Accounting Control System is concerned with providing information primarily to managers inside an organization to examine the execution of plans and to plan for changes of the organization as a system. By a system we mean “a set of objects together with relationships between the objects and between their attributes related to each other and to their environment so as to form a whole” (see details in SSK 1990, pp.13-24, particularly, Figure 1-4). This systemsthinking approach focuses on the interrelationships, which can be contrasted with the analytical method that segments the whole into smaller parts to better understand the functioning of the whole. Nonetheless, the former approach supplements rather replaces the latter (see SSK 1990, pp.7-9). Managerial Accounting is also concerned with providing information to managers inside an organization who plan and control its operations. To carry out these planning and control responsibilities, managers need information about the organization. As this information often relates to the costs of the organization, managerial accounting is essentially cost accounting. The term cost is used in many different ways because there are many types of costs; and these costs are classified differently according to the immediate needs of management, which results in several cost accounting systems. Consequently, the difference between managerial accounting and accounting control system relies on their focuses: the former focuses cost information of an organization as the system, while the latter the organization itself. I. You have learned various types of cost concepts. Thus, present these cost terms/concepts in a systematic way, so that they become useful information for managers and investors. II. For concreteness, we consider manufacturing organizations. By manufacturing we mean that