Cost Accounting: Its role and ethical considerations Essay -- Business

Cost Accounting Its role and ethical considerationsIntroductionAccounting is the process of identifying, measuring, andcommunicating economic information ab pop an entity for the purpose of do decisions and inform judgements. The major areas of withinthe account statement are Financial Accounting, Managerial Accounting/CostAccounting and Auditing- Public AccountingManagerial accounting is concerned with the intake of economic andfinancial information to plan and control the activities of an entityand to support the management in planning and decision-making process.Cost accounting is the subset of managerial accounting and it helpsmanagement in determination and accumulation of product, process orservice cost.Role of Cost AccountingIncreased competition and uncertain business conditions have put earthshaking pressure on corporate management to make informed businessdecisions and maximize their company?s financial performance. Inresponse to this pressure, a slog of management acco untingtools and techniques has emerged. One of the most important tools thata management rear end use is - Cost Accounting. Cost accounting helpsmanagement in making strategic decisions by identifying anorganization?s comparative strengths and weaknesses and a better waysto use, improve or eliminate them. Cost information is used for moredifferent purposes Performance measurement Cost reduction and control Determination of reimbursement and fee or price setting Program authorization, modification, and discontinuation decisions and Decisions to contract out work or make other changes in the methods of production or delivery of services.Cost accounting provides various tools for example Cost-benefitanalysis, break-even analysis,and CVP to help management in making decisions.Role of Ethics in Cost AccountingWebsters Dictionary defines ethics as ...the principles of conductg all overning an individual or a concern the discipline dealing withwhat is good or bad or right and wrong, o r with moral duty andobligation a particular theory or system of moral values. Ethics arevery important in any field. In cost accounting also ethics hornswoggle animportant role. Ethical situations can easily arise in any businesssetting when money is involved. . The whole Enron saga was the result... ...g is an important tool that can help management inmaking informed decision. Though it is not legally required but stillit is necessary to run an entity effectively. Cost accounting isturned toward the future. There are different methods of costing inCost Accounting Absorption costing and Variable costing. Both havesome merits over the other.An entity can use both of them for different uses. Absorption costingcan be used for external reporting, managers need to review the effectof their decision on financial reporting to outsiders whereas Variablecosting can be used by managers to review the effect of managementdecisions on production, costs and profits.ReferencesAbsorption, Variab le, and Throughput Costing. Retrieved on December15,2004 fromhttp//www.kellogg.nwu.edu/ efficiency/balachan/htm/Acct439/Solutions/solution_manual19.docHilton, Ronald W Cost Management Strategies for Business Decisions,Second EditionMarshall Accounting, What the Numbers Mean, Sixth Edition 3-8Turner, Robert M Ethics and professionalism the CPA in industry,April1990. Retrieved on December15, 2004 from http//www.nysscpa.org/cpajournal/old/08416230.htm