Managerial Accounting and Financial Accounting Financial Manageria Accounting Accounting 1. Users Investors, creditors, and Managers, employees, and other external users other internal users 2.Time focus Historical perspective Future emphasis 3. Emphasis Objectivity and Relevance Verifiability for planning and control 4.Importance Precision of information Timeliness of information 5. Subject focus Summarized data for Detailed segment re ports the whole organization of an organization 6. Requirements Structured and often Re lative ly flexible controlled by GAAP (no GAAP) Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 6
6 Managerial Accounting and Financial Accounting Financial Managerial Accounting Accounting 1. Users Investors, creditors, and Managers, employees, and other external users other internal users 2. Time focus Historical perspective Future emphasis 3. Emphasis Objectivity and Relevance Verifiability for planning and control 4. Importance Precision of information Timeliness of information 5. Subject focus Summarized data for Detailed segment reports the whole organization of an organization 6. Requirements Structured and often Relatively flexible controlled by GAAP (no GAAP)
Cost classifications A Costs can be classified by n Relevance D Behaviour n Controllability I Traceability D Function Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity 7
7 Cost Classifications ⧫Costs can be classified by: Relevance Behaviour Controllability Traceability Function
Costs Classification by Relevance ◆ Relevant n f costs influence a decision Costs that are applicable to a particular decision. Costs that should have a bearing on which alternative a manager selects. Costs that are avoidable future costs that differ between alternatives ◆ Irrelevant n f costs do not influence a decision Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
8 Costs Classification by Relevance ⧫ Relevant If costs influence a decision →Costs that are applicable to a particular decision. →Costs that should have a bearing on which alternative a manager selects. →Costs that are avoidable. →Future costs that differ between alternatives. ⧫ Irrelevant If costs do not influence a decision
Costs Classification by Relevance ◆ Sunk costs D All costs incurred in the past that cannot be changed by any decision made now or in the future. n should not be considered in decisions D relevant n Example: You bought an automobile that cost $30,000 two years ago. The $30,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the $30.000 cost. Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
9 Costs Classification by Relevance ⧫ Sunk Costs All costs incurred in the past that cannot be changed by any decision made now or in the future. should not be considered in decisions. Irrelevant Example: You bought an automobile that cost $30,000 two years ago. The $30,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the $30,000 cost
Costs Classification by Relevance ◆Out- of-pocket costs n require future outlays of cash n associated with a particular decision n relevant for future decisions n Example: Considering the decision to take a vacation or stay at home, if you choose a vacation, you will only have travel costs(out-of- pocket costs). Task Team of FUndaMientalactoUntING Business Sehool. Sun Yatsen niversity
10 Costs Classification by Relevance ⧫ Out-of-pocket costs require future outlays of cash associated with a particular decision relevant for future decisions Example: Considering the decision to take a vacation or stay at home, if you choose a vacation, you will only have travel costs (out-ofpocket costs)