Managerial Accounting

Period Costs – Meaning, Types, Advantages and Examples | Managerial Accounting

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Period Costs

Period Costs

Period cost refers to any expense that cannot be capitalized into prepaid expenses, inventory, or fixed assets. They cannot be capitalized on a company’s balance sheet. Period costs are more closely related to the passage of time than they are to transactional events. As period cost is always charged to expenses at once, it is better referred to as a period expense. Period costs are charged to expense in the period they are incurred. On the income statement, this type of cost is not included in cost of goods sold. Instead, it is usually included in the selling and administrative expenses section of the income statement.

Period costs aren’t attached to one particular product or the cost of inventory like product costs. As a result, period costs are categorized as an expense in the accounting period in which they occur.

According to managerial and cost accounting, period costs are costs that are not associated with or related to the production of inventory. Some of the examples of period cost include selling, general and administrative (SG&A) expenses, marketing expenses, CEO salary, and rent expense relating to a corporate office. These costs are not related to the production of inventory and that’s why expense in the period is incurred. Therefore, all costs which are not involved in the production of a product are period costs.

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Financial Accounting Vs Cost Accounting – Introduction to Cost and Management Accounting | Management Notes

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Financial Accounting Vs Cost Accounting

Financial Accounting Vs Cost Accounting Both financial accounting and cost accounting deal with systematically recording and presenting financial information. While financial accounting reveals the profits and losses of a business as a whole during a given period, cost accounting displays, by analysis and localisation, the unit costs and profits and losses of different product lines. … Read more

Scope of Management Accounting – Introduction to Cost and Management Accounting | Management Notes

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Scope of Management Accounting

Scope of Management Accounting

In management accounting, financial accounting extends to the management of cost accounting, budgeting, and statistical data. It meets the legal and conventional requirements regarding the presentation of financial statements (profit and loss account, balance sheet and cash flow statement), but emphasizes the establishment and operation of internal controls. The scope of management accounting are asfollows:

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Nature of Management Accounting – Introduction to Cost and Management Accounting | Management Notes

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Nature of Management Accounting

Nature of Management Accounting

The purpose of management accounting is to collect and provide accounting, cost accounting, economic and statistical information to the men at various managerial levels in order to assist them with their managerial functions and their evaluations. In the performance of managerial functions, namely planning, decision-making, and control, it involves the development and application of various techniques of recording, analyzing, interpreting, and presenting financial, costing, and other data. Management accounting incorporates not only accounting techniques, but also statistical and mathematical ones. Since management accounting is forward-looking, it should be able to treat economic data and information in a way that will facilitate its use by management.
The following aspects are considered as the nature of management accounting:

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Difference between Cash Flow Statement and Fund Flow Statement | Managerial Accounting

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Difference between Cash Flow Statement and Fund Flow Statement

Difference between Cash Flow Statement and Fund Flow Statement

There are several meanings for the term funds. A cash flow statement is a statement of changes in the financial position prepared on a cash basis. A fund flow statement is prepared based on a statement of changes in a company’s financial position, which is commonly referred to as a statement of working capital. Both cash flow statements and funds flow statements provide information about changes in a business’ financial position. However, there are a few key differences between a cash flow statement and a fund statement.

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Cost Accounting and Management Accounting – Relationship among them | Management Notes

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Cost Accounting and Management Accounting

Cost Accounting and Management Accounting

Cost accounting refers to the process of accounting for costs. In accounting, all income and expenses are recorded, and periodic statements and reports are prepared to estimate and control costs. As such, it is the formal mechanism by which the cost of products or services is determined and controlled. The objective of management accounting is to collect, analyze, interpret, and present all the accounting information needed by management. Performance evaluation is closely associated with management control, which involves planning, executing, measuring, and evaluating performance.

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Material Usage Variance – Variance Analysis | Standard Costing

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Material Usage Variance 

Material Usage Variance 

Material Usage variance (MUV) is the difference between the standard quantity in production and the actual quantity consumed in production. During the production process, if the raw materials used in the production differ from the standard quantities that have been used to produce the output then this will result in MUV.

MUV is the deviation of the ratio of the actual quantity of materials consumed for the actual output from the standard quantity of materials to be consumed for the actual output. The deviation is of this quantity is to be multiplied by the standard price to convert the quantity into monetary value. MUV is favorable when the actual quantity of direct materials used is less than the total standard quantity allowed for the actual output.

The concept of material usage variance refers to the difference between the actual usage of materials in the production process versus the standard usage based on the amount of output produced.

The difference between the actual and expected material quantities used in a process is measured as an actual quantity. As a result of the production plan and the expected efficiency of the production process, the standard quantity of material is determined.

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Material Mix Variance – Variance Analysis | Standard Costing

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Material Mix Variance

Material Mix Variance | Variance Analysis | Standard Costing Material Mix variance (MMV) is the difference between the actual composition of Mixture and the standard mixture. During the production process, if the materials are not actually placed into production in the same ratio as the standard mixture ratio then this will result in MMV. MMV  … Read more

Material Cost Variance – Variance Analysis | Standard Costing

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Material Cost Variance

Material Cost Variance | Variance Analysis | Standard Costing Material cost variance (MCV) is the sum of material usage variance and price variance. In other words, it is the difference between the actual output between the actual cost of Direct material used and the standard cost of direct material specified for the actual output achieved. … Read more

Variance Analysis – Standard Costing | Managerial Accounting

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Variance Analysis

Variance Analysis | Standard Costing | Managerial Accounting Variance analysis is a task of comparing the Actual Performances with the Predetermined Performance Standards to determine how well the targets have been met. Variances are the deviations or the differences between what should be the (standard) and what has (actually) happened. If the actual performance meets … Read more

Master Budget – Components of Master Budget | Managerial Accounting

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Master Budget

Master Budget

What is master budget

Master Budget is the combination of different set of separate independent functional budgets reflecting a complete set of financial plan for a business firm. When all of the functional budgets are prepared then at the end maser budget is prepared. The type of functional budget that are prepared depends upon the nature of the business entity. The master budget is a complete set of books of accounts for future because it accumulates all the financial information in one place. Master budget records and reports the business transaction of the forthcoming periods whereas the financial accounting records and reports the business transaction of already incurred transaction.

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