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Managerial Accounting Methods and Functions Contents Managerial Accounting Methods and Functions Contents 1 Introduction 1 1.1 Management accounting ........................................ 1 1.1.1 Definition ........................................... 1 1.1.2 Scope, practice, and application ................................ 1 1.1.3 Differences between financial accountancy and management accounting ........... 2 1.1.4 Traditional vs. innovative practices .............................. 2 1.1.5 Role within a corporation ................................... 3 1.1.6 Specific methodologies .................................... 3 1.1.7 Resources and continuous learning .............................. 4 1.1.8 Tasks/services provided .................................... 4 1.1.9 Related qualifications ..................................... 5 1.1.10 Methods ............................................ 5 1.1.11 See also ............................................ 5 1.1.12 References .......................................... 5 1.1.13 External links ......................................... 6 1.2 Comparison of management accounting and financial accounting ................... 6 1.2.1 Regulation and standardization ................................ 6 1.2.2 Time Period ......................................... 6 1.2.3 Other differences ....................................... 7 1.2.4 References .......................................... 7 1.3 Financial accounting .......................................... 7 1.3.1 Objectives of financial accounting .............................. 7 1.3.2 Qualities of financial accounting ............................... 7 1.3.3 Three components of financial statements .......................... 8 1.3.4 Basic accounting concepts .................................. 8 1.3.5 Graphic definition ...................................... 9 1.3.6 Financial accounting vs cost accounting ........................... 9 1.3.7 Related qualification ..................................... 10 1.3.8 See also ............................................ 10 1.3.9 Further reading ........................................ 10 1.3.10 References .......................................... 10 2 Methods 11 i ii CONTENTS 2.1 Standard cost accounting ....................................... 11 2.1.1 Overview ........................................... 11 2.1.2 History ............................................ 11 2.1.3 Standard cost accounting, topics ............................... 11 2.1.4 See also ............................................ 12 2.1.5 References .......................................... 12 2.1.6 Further reading ........................................ 12 2.2 Cost accounting ............................................ 12 2.2.1 Origins ............................................ 13 2.2.2 Cost Accounting vs Financial Accounting .......................... 13 2.2.3 Types of cost accounting ................................... 13 2.2.4 Elements of cost ....................................... 14 2.2.5 Classification of costs ..................................... 14 2.2.6 Standard cost accounting ................................... 15 2.2.7 The development of throughput accounting .......................... 15 2.2.8 Activity-based costing ..................................... 15 2.2.9 Integrating EVA and Process Based Costing ......................... 16 2.2.10 Lean accounting ........................................ 16 2.2.11 Marginal costing ....................................... 16 2.2.12 See also ............................................ 17 2.2.13 References .......................................... 17 2.2.14 Further reading ........................................ 17 2.2.15 External links ......................................... 17 2.3 Variance (accounting) ......................................... 17 2.3.1 Types of variances ...................................... 17 2.3.2 Variance Analysis ....................................... 18 2.3.3 See also ............................................ 18 2.4 Whole-life cost ............................................ 18 2.4.1 Financial ........................................... 18 2.4.2 Environmental and social ................................... 18 2.4.3 Whole-life cost topics .................................... 19 2.4.4 IT industry usage ....................................... 19 2.4.5 Automobile industry, finances ................................ 20 2.4.6 See also ............................................ 20 2.4.7 References .......................................... 20 2.4.8 Further reading ........................................ 20 2.4.9 External links ......................................... 20 2.5 Activity-based costing ......................................... 20 2.5.1 Objectives .......................................... 20 2.5.2 Prevalence ........................................... 21 2.5.3 Methodology ......................................... 22 CONTENTS iii 2.5.4 Application .......................................... 22 2.5.5 Implementation ........................................ 22 2.5.6 Integrating EVA and Process Based Costing ......................... 23 2.5.7 Limitations .......................................... 23 2.5.8 References .......................................... 23 2.5.9 External links ......................................... 24 2.6 Grenzplankostenrechnung ....................................... 24 2.6.1 Background .......................................... 24 2.6.2 Concepts of GPK ...................................... 24 2.6.3 Core elements of GPK .................................... 25 2.6.4 GPK marginal costing diagram ................................ 26 2.6.5 References .......................................... 26 2.6.6 External links ......................................... 27 2.7 Resource consumption accounting ................................... 27 2.7.1 Background .......................................... 27 2.7.2 Concepts of Resource Consumption Accounting ....................... 28 2.7.3 The Core Elements of RCA ................................. 28 2.7.4 Additional information .................................... 28 2.7.5 References .......................................... 28 2.7.6 External links ......................................... 29 2.8 Throughput accounting ........................................ 29 2.8.1 History ............................................ 30 2.8.2 The concepts of Throughput Accounting ........................... 30 2.8.3 Explanation .......................................... 31 2.8.4 Relevance ........................................... 31 2.8.5 References .......................................... 32 2.9 Lean accounting ............................................ 32 2.9.1 Introduction ......................................... 32 2.9.2 Getting Started ........................................ 34 2.9.3 Financial Reports for Lean Operations ............................ 35 2.9.4 Making Decisions without the Use of Product or Process Costs ............... 36 2.9.5 External Reporting ...................................... 37 2.9.6 Further Simplifying the Accounting Processes ........................ 37 2.9.7 Focusing on Customer Value ................................. 38 2.9.8 External links ......................................... 38 2.9.9 References .......................................... 38 2.10 Funds transfer pricing ......................................... 38 2.10.1 External links ......................................... 39 3 Functions 40 3.1 Operations research .......................................... 40 3.1.1 Overview ........................................... 40 iv CONTENTS 3.1.2 History ............................................ 40 3.1.3 Problems addressed ...................................... 43 3.1.4 Management science ..................................... 43 3.1.5 Societies and journals ..................................... 44 3.1.6 See also ............................................ 45 3.1.7 References .......................................... 45 3.1.8 Notes ............................................. 46 3.1.9 Further reading ........................................ 46 3.1.10 External links ......................................... 47 3.2 IT cost transparency .......................................... 47 3.2.1 Capabilities .......................................... 48 3.2.2 Analysts’ take ......................................... 48 3.2.3 IT Cost Breakdown ...................................... 48 3.2.4 See also ............................................ 48 3.2.5 References .......................................... 49 3.2.6 External links ......................................... 49 3.3 Transfer pricing ............................................ 49 3.3.1 Profit allocation ........................................ 49 3.3.2 Economic theory ....................................... 50 3.3.3 General tax principles ..................................... 51 3.3.4 U.S. specific tax rules ..................................... 56 3.3.5 OECD specific tax rules .................................... 57 3.3.6 EU .............................................. 57 3.3.7 China specific tax rules .................................... 57 3.3.8 Agreements between taxpayers and governments and dispute resolution ........... 58 3.3.9 Fraud ............................................. 58 3.3.10 Reading and overall reference list ............................... 59 3.3.11 References .......................................... 59 3.3.12 External links ........................................
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