Perodua Supply Chain Management

CHAPTER 1:  Conceptual Framework of Accounting

1.         Accounting, Financial Accounting and Management Accounting

• Accounting could be defined as the process of collecting, recording, summarizing and communicating financial information. There are two broad types of accounting information i.e. financial accounting and management accounting.

• Financial accounting could be defined as reporting of the financial position and performance of a firm through financial statements issued to external users on a periodic basis.

• Management accounting relates to the provision of accounting information to managers within the organizations for planning, control and decision-making purposes.

Accounting

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                 Financial Accounting                        Management Accounting

Broadly, Accounting can be sub-classified as follows with related functions :

• Cost Accounting – concerned with costing of products and services for profit measurement and stock valuation. (Historical)

It is ‘the establishment of budgets, standard costs and actual costs of operations, processes, activities or products; and the analysis of variances, profitability or the social use of funds’. ~ referred by CIMA Official Terminology (2000)

• Financial Accounting – Concerned with the preparation of Financial Statements for reporting and compliance purposes. (Historical)

It is the classification and recording of the monetary transactions of  an entity in accordance with established concepts, principles, accounting standards and legal requirements and their presentation, by means of profit and loss accounts, balance sheet s and cash flow statements, during and at the end of an accounting period. ~ referred by CIMA Official Terminology (2000)

• Management Accounting – provision of information for planning, controlling and decision making (Future Orientated)

It is ‘the application of the principles of accounting and financial management to create, protect, preserve and increase value so as to deliver that value to the stakeholders of profit and not-for-profit enterprises, both public and private.