REVIEW
of
FINANCE -
November, 2018
57
- For evaluating function, there are reports
namely expense report, sales report and gain
report for each category of product, service,
unit or sector; bill of quantities, report of capital
costs of sold and purchased commodities by
customers; detailed report of finished and
sold products; report of employment and
productivity, etc. These reports aim at providing
happened information (past information) to
managers to evaluate the real situation of plan
implementation and, thereby, make additional
decisions to improve performance and achieve
set out objectives.
- Cost accounting also provides analysis reports
to compare between options on future issues such
as earnings per cost report using an analysis on
the relationship between expenses – quantities
– earnings to consult managers to make optimal
decisions; analysis report of factors affecting
production and financial plans… reports can be
prepared by short-term, mid-term or long-term
relating to the use of resources or occurring costs
which may be used to identify price or profit and
to select options. Therefore, cost information is
usually an important source for effective decisions
made by managers.
Secondly,
cost accounting plays a role in
enhancing management performance
Management is a specific activity which can be
performed simultaneously with other activities of
organization. However, success or achievement
of an organization is substantially affected by
management activities, especially the activities
of managers. When considering and evaluating
the role of managers, most of the management
specialists agree that: “If objective risks are
excluded, success or failure of an organization is
determined by the role of managers”.
This argument is true as managers create
development orientation for the organization on
the aspect of building overall goals and direct all
labour and resources to implement those goals.
Only by great unity of spirits and actions may an
organization obtain effectiveness. On the other
hand, management aims at obtaining additional
value to organization by minimizing loss and
increasing surplus of organization and society.
It also helps organization adapt with changes
of environment, survive in a competitive world,
seize opportunities, prevent negative external
effects and ensure sustainable development of
organization.
Management accounting in general and cost
accounting inparticularusually focusonkey issues
of management. One of these issues is evaluating
capacity and responsibility of managers in
managing activities, creating value and achieving
goals that organization is after. Presently, most of
previous studies, when discussing the role of cost
accounting in management, only mention its role
in enhancing performance of activities in general
but not performance of management activities.
However, inspection and evaluation processes of
costaccountingaretwoaspectsthathaveinteractive
relationship. On one side, this relationship helps
recognize situation of enterprise’s activities and
discover major causes to adjust future plans and
improve performance of those activities. On the
other hand, through responding to and evaluating
performance of general activities, cost accounting
indirectly reflects and evaluates responsibility
and performance of managers themselves. Cost
accounting, by means of responsibility accounting
at cost centers, is like a mirror for managers
to reevaluate their understandings, views,
responsibilities and capacity of management.
If a manager applies effective management
model, cost accountants will follow effective cost
management models and, as a results, the use of
resources and costs of units will be more effective
and vice versa. In addition, managers need
information of costs implemented by divisions
and individuals to apply commendation and
reward that encourage employee’s performance.
Thus, cost accounting is an important instrument
that can be employed to enhance management
performance of organization.
References:
1. Charles T. Horngren, Srikant M. Datar, Madhav Rajan (2011) -Cost
Accounting - A Managerial Emphasis, 14th Edition - Prentice Hall;
2. Charles Horngren (2012), Cost Accounting - AManagerial Emphasis 14E;
3. William Lanen, Shannon Anderson, Michael Maher (2013),
Fundamentals of Cost Accounting-McGraw-Hill Education;
4. Markus B. Baum (auth.)(2013), Service Business Costing - Cost
Accounting Approach for the Service Industry-Gabler Verlag;
5. Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan, (2014), Cost
Accounting-Prentice Hall.
