Describe the Difference in Managerial Accounting vs. Cost Accounting

Topics: Cost accounting, Lean manufacturing, Lean accounting Pages: 5 (1468 words) Published: June 22, 2011
Describe how managerial accounting is different from cost accounting.
Cost accounting is the process of tracking, recording and analyzing costs associated with a company’s product or project. Internal managers are the ones who normally use cost accounting information. Direct Costs, Indirect Costs and Overhead/Absorbed Costs are usually what are measured in Cost Accounting. This information is then used by managers when decisions are made dealing with company costs and how to improve the profit. (Wild & Shaw)

Management accounting provides the other managers information on the business decisions that allow them to keep their management and control functions equipped. Management accounting is used within an organization and is confident. Not many have access to information- like when it comes to making decisions.

Cost Accounting actually operates within Management Accounting. Management accounting evolved from cost Accounting as businesses became complex. More date that is comprehensive is needed to help when management makes decisions other than the typical Product Costing reports. (Wild & Shaw) Management Accountants are involved in other accounting related functions and cost accounting is used as a part of the process. Describe the lean production philosophy.

There are developing principles that are the right ones for your organization and applying them to achieve high performance so that it adds value for customers and society. Base management decisions on a long term approach even if this is at the expense of short term objectives (Principles of Lean Production). There is a way to create a flow so that the problems are visible and one can take charge to avoid the overproduction and even out the workload. For lean production, there is always room for improvement and for employees to participate. Only leaders who truly understand the production can properly teach it to others. Another way would be to challenge and respect others by helping them improve. To improve production, find out what the customer really wants, focus and understand there are different levels of customer needs. (Principles of Lean Production) Lean production philosophy was championed by the Japanese company, Toyota. There was an approach to eliminating material, sourcing or the cost of production unless it was directly involved with the value of the production line. When used properly, waste and such are eliminated and the quality goes up, the costs go down. Compare and contrast accounting principles in lean production to those of typical production.

Lean production is a process that eliminates waste and can reduce the cost. One method is to use only product that the manufacture needs and what the customer directly wants. The cost that is associated with inventory and excess production are eliminated. When a company uses lean manufacturing, there are financial savings that exists and traditional accounting methods are not accounted for in these savings. (Finance Information) A company applies lean thinking to eliminate waste in its accounting process and focuses on cost allocation methods such as activity-based costing. The company develops alternative performance measures that will benefit the manufacturing process. (Wild & Shaw) Lean production identifies several waste targets for reduction. Transport- is the moving process that is not performed while processing. Inventory- this includes all components in the work process and finished product that is not processed. Motion- this involves the equipment and people that are moving more than what are required for the performance of the task. Waiting- this is the next processing step. Overproduction- what is already ahead other than what is in demand. Over processing- when designing or creating an activity and the tools are poor. Defects- what is involved when inspecting and taking care of defects. (Key Lean Manufacturing Principles) How should Dr. White to prepare for reduced budgets?...

References: Jane, Mary. (2011) Objectives and Characteristics of an Internal Accounting System, Retrieved from
Ethics in Accounting, Encyclopedia of Business and Finance, Retrieved from
Accounting & Internal Control Procedures, Retrieved from
Principles of Lean Production, Retrieved from
Finance Information, Retrieved from
Key Lean Manufacturing Principles, Retrieved from
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