Cost Accounting: 8th Edition · Part 1

Author: (USA) Charles T. Horngren
Translator: Liu Li / et al.
Editor-in-Chief: Du Houwen
Publisher:
Publishing Date: 1998-03-01
Features: This book takes a management application perspective, focusing on the value chain of research and development, design, production, marketing, distribution, and after-sales service as its main thread, systematically elaborating on the content of cost accounting. It not only provides a detailed discussion of fundamental cost accounting topics such as enterprise cost systems, job-order costing, cost accumulation and allocation, standard costing and variable costing, and cost variance measurement but also dedicates significant space to exploring the new developments in cost accounting, such as the impact of automated operations on cost accounting, the influence of computer technology applied to planning and control, the effects of just-in-time production and just-in-time purchasing management on cost accounting, activity-based costing, quality and cost, and more.
Introduction to the Series Classics in Business Administration Translation Series
After more than a decade of reform and opening-up, China is establishing a socialist market economy with Chinese characteristics. A vibrant and prosperous China is increasingly attracting global attention. Although the management level of Chinese industrial and commercial enterprises has improved over the years, unresolved issues such as outdated business concepts, irrational management systems, and weak competitiveness, which have long existed under the traditional planned economy system, have left a significant gap in management capabilities compared to developed countries. The reality makes it clear: for enterprises to grow and the economy to develop, management must be strengthened, and economic efficiency must be improved. Vice Premier Zhu Rongji recently pointed out, "It is now time to vigorously advocate the improvement of Chinese management and the development of Chinese management science. It is indeed necessary to emphasize that management science and management education are also the paths to national prosperity. The importance of management has not been sufficiently publicized. We must vigorously promote the strengthening of enterprise management and the revitalization of Chinese management science. Modern management may have started earlier in the West, but we can also publish more books introducing foreign experiences to see how others have developed. This will help shift mindsets, adapt to the market, value management, learn to use people, and operate thriftily."①
Linked to China's rapid economic development, the growth of current management education and the Master of Business Administration (MBA) programs has also been swift, facing severe challenges such as massive talent demand, complex student demographics, multiple teaching levels, and outdated teaching methods. The traditional "theory-to-theory" teaching approach is severely detached from management practice and lacks textbooks that are ( - close to practice), vivid, actionable, and capable of systematically cultivating students' ability to think and solve practical problems. Teachers and students have strongly reacted to this issue.
Management is a highly practical and applied discipline, with the center of teaching being the textbook. To address the current inadequacies of business management textbooks in China, China Renmin University Press, one of China's leading publishers of humanities textbooks for higher education, adheres to the principles of innovation, introduction, and complementarity in textbook publication, committed to promoting the development of business management education in China. Two years ago, the university began planning and organizing the publication of this translation series, collaborating with Prentice Hall, a world-renowned educational publishing house in the United States, to jointly launch the Classics in Business Administration Translation Series. This series comprehensively reflects the new theories and research findings in the fields of global business management since the 1990s, aligning with international practices.
The books selected for this series are among the top-selling business management books on Prentice Hall's global bestseller lists, widely read in the Americas, Europe, Asia, and Australia, and commonly adopted by universities and business schools worldwide. They are the most influential textbooks in the field of business management education today. The authors of this series are all renowned professors in various academic fields of American business management education, enjoying high prestige. Their textbooks, used by hundreds of universities and business schools in the United States and around the world, have been proven to be broad in scope, rich in content, insightful in analysis, concise in language, easy to understand, vivid, thought-provoking, and actionable, and have been reprinted multiple times.
The translators of this series are mid-career academic elites from the business management departments of Peking University and China Renmin University, many of whom have studied abroad in the West. Through long-term teaching research and social practice, they have accumulated extensive experience and possess high translation proficiency. The operation of this series, from market research and topic planning, the selection and justification of book titles, the assessment and selection of translators, the determination of translation and proofreading requirements and standards, the control of translation quality, and the design of covers, layouts, and illustrations, all adhere to high-level and high-standard principles, striving to deliver business management textbooks that are accurate in translation, fluent in language, and as true to the original style as possible in both content and form.
This series references internationally recognized core courses in management, following the principle of progressing from the general to the specific while fully considering the requirements for general and specialized courses in Chinese business management. It has a broad scope of application, suitable for teaching needs across various disciplines and different levels, as well as for training business management personnel and personal self-study.
To bring this series to publication, both China Renmin University Press and Prentice Hall have attached great importance and invested significant effort. To ensure translation quality, an editorial committee composed of experts and scholars from Peking University, China Renmin University, and the Chinese Academy of Social Sciences was established. Many Chinese scholars who studied abroad in the U.S. and domestic experts and professors from relevant fields participated in the recommendation and justification of the original works. Here, we express our respect and heartfelt gratitude to them.
Classics in Business Administration Translation Series Editorial Committee
December 1996
Excerpt:
The Main Purpose of a Management Accounting System
Goal 3: Recognize the 4 Important Purposes of an Accounting System
In almost any organization, the accounting system is the primary and most reliable quantitative information system. It should provide information to achieve the following four broad purposes:
Goal 1: Provide internal routine reports to management on:
(1) Cost planning and cost control,
(2) Performance evaluation of employees and activities.
Goal 2: Provide internal routine reports to management on:
the profitability of products, brand categories, customers, and distribution channels. This information is used when making resource allocation decisions or certain pricing decisions.
Goal 3: Provide internal non-routine reports to management on strategic decision-making information regarding certain matters, such as
formulating overall or long-term plans, developing new products, and making equipment investments.
Goal 4: Provide external reports through financial statements used by investors, government agencies, and other external stakeholders.
To meet external requirements, companies must report revenues and inventory costs in accordance with the generally accepted accounting principles (GAAP) that guide financial accounting.
Each of these purposes may require data to be collected and reported in different ways. An ideal database should include very detailed information. Accountants collect or organize this data to answer questions from internal and external information users. Accountants cannot anticipate every decision that users will need to make. Therefore, the system is typically designed to meet the foreseeable widest range of management needs.
Management Accounting, Financial Accounting, and Cost Accounting
Management accounting focuses on internal customers, measuring and reporting financial and other information that helps managers achieve organizational goals. It is related to the first three purposes listed above. As explained in many chapters of this book, "costs differ for different purposes" is the central theme of management accounting. Financial accounting focuses on external reporting and is related to the fourth purpose listed above. Cost accounting is management accounting plus a portion of financial accounting—the extent of information provided by cost accounting depends on meeting external requirements. This relationship can be summarized as follows.
Financial accounting is constrained by generally accepted accounting principles (GAAP). These principles limit the rules for measuring revenues and costs and the classification of items on the balance sheet as assets, liabilities, and owner's equity. In contrast, management accounting is not constrained by the accounting principles accepted in financial reporting. For example, a company selling consumer goods may list estimated brand value (such as the "Coca-Cola" trademark) in its internal market financial reports, but this does not comply with GAAP. Financial accounting looks at the past; financial reports focus on what has happened. In contrast, management accounting emphasizes the future, providing not only historical reports but also budgets and other predictive information.
Cost Management and Accounting Systems
In recent years, the term "cost management" has been widely used, but there is still no unified definition. Here, we use "cost management" to describe the actions of managers in meeting customer requirements while continuously reducing and controlling costs. A key aspect of cost management is recognizing cost expenditures resulting from previous management decisions. For example, decisions regarding factory design and material flow for production are made before production begins, but raw material transportation costs actually occur only after production starts. However, the reduction of raw material transportation costs is achieved through careful analysis during factory design and effective daily transportation activities after production begins.
New Themes in the Field of Management
Goal 4: Describe the 5 Management Themes That Influence the Development of Management Accounting Systems
Management accounting is an activity that helps managers make better decisions. Changes in management practices require a reevaluation of the design and operation of management accounting systems themselves. Figure 1-2 illustrates the themes of recent developments in management methods. The following chapters explain how management accounting aligns with these themes. There are five themes in Figure 1-2.
Postscript: Translator's Postscript
With the support and guidance of colleagues at China Renmin University Press, after a rigorous and meticulous effort, we have finally completed the translation of Cost Accounting. The book was led by Wang Liyan, Liu Li, and Huang Huixin in translation; translated by Wang Liyan, Wang Kefang, Yin Chunyan, Deng Ao, Liu Li, Zhu Qibing, Zhu Bin, Li Ling, Li Weigang, Song Xiwu, Wu Fuying, Yang Wangui, Zhao Yugang, Guo Jianhua, Cui Han, and Teng Min (in order of surname); and finally reviewed and finalized by Professors Liu Li and Huang Huixin.
May 1997