,© 2017 University of South Africa
All rights reserved
Printed and published by the
University of South Africa,
Muckleneuk, Pretoria
MAC1501/1/2018-2020
70505632
Page layout done by department
, CONTENTS
Page
INTRODUCTION .......................................................................................................................ix
(a) Welcome ........................................................................................................................ ix
(b) Purpose of this module ................................................................................................... ix
(c) Assumed knowledge and skills ....................................................................................... ix
(d) Module outcomes ........................................................................................................... ix
(e) Learning package for this module ................................................................................... ix
(f) Approach to teaching and learning .................................................................................. x
(g) A note on decimals ......................................................................................................... xi
(h) Conclusion...................................................................................................................... xi
LEARNING UNIT 1: INTRODUCTION TO MANAGEMENT ACCOUNTING ............................. 1
1.1 INTRODUCTION ............................................................................................................ 2
1.2 MANAGEMENT AND FINANCIAL ACCOUNTING ......................................................... 3
1.2.1 Financial accounting ....................................................................................................... 3
1.2.2 Management accounting ................................................................................................ 5
1.2.3 A brief history of management accounting ...................................................................... 5
1.3 FUNCTIONS OF A MANAGEMENT ACCOUNTING SYSTEM ....................................... 7
1.4 SELF-ASSESSMENT QUESTIONS ..............................................................................11
1.5 SOLUTIONS TO SELF-ASSESSMENT QUESTIONS ...................................................13
LEARNING UNIT 2: BASIC CONCEPTS OF COST ACCOUNTING ........................................15
2.1 INTRODUCTION ...........................................................................................................16
2.2 TYPES OF BUSINESS ORGANISATIONS ...................................................................16
2.3 COSTING TERMINOLOGY ...........................................................................................17
2.3.1 Cost concepts................................................................................................................17
2.3.2 Cost classification ..........................................................................................................18
2.4 THE FLOW OF COSTS IN A MANUFACTURING ENVIRONMENT ..............................28
2.5 SELF-ASSESSMENT QUESTIONS ..............................................................................32
2.6 SOLUTIONS TO SELF-ASSESSMENT QUESTIONS ...................................................35
LEARNING UNIT 3: COST ACCOUNTING SYSTEMS ............................................................37
3.1 INTRODUCTION ...........................................................................................................38
3.2 ELEMENTS OF A COST ACCOUNTING SYSTEM .......................................................38
iii
.......
MAC1501/1
, 3.2.1 Basis for measuring production input costs....................................................................39
3.2.2 Methods for the valuation of finished goods ...................................................................45
3.2.3 Methods for assigning overheads to production .............................................................49
3.2.4 Methods of cost accumulation .......................................................................................52
3.2.5 Cost-flow assumptions...................................................................................................53
3.2.6 Currency of inventory system information ......................................................................54
3.2.7 Conclusion.....................................................................................................................54
3.3 SELF-ASSESSMENT QUESTIONS ..............................................................................55
3.4 SOLUTIONS TO SELF-ASSESSMENT QUESTIONS ...................................................57
LEARNING UNIT 4: ACCOUNTING FOR PURCHASED INVENTORIES ................................59
4.1 INTRODUCTION ...........................................................................................................60
4.2 CATEGORIES OF INVENTORY ...................................................................................60
4.2.1 IAS 2 – inventory ...........................................................................................................60
4.2.2 Merchandise ..................................................................................................................61
4.2.3 Finished goods ..............................................................................................................61
4.2.4 Work-in-progress ...........................................................................................................62
4.2.5 Materials ........................................................................................................................62
4.2.6 Consumables ................................................................................................................63
4.3 PURCHASED INVENTORY ..........................................................................................64
4.3.1 Cost of purchased inventory ..........................................................................................65
4.3.2 Inventory systems..........................................................................................................65
4.4 INVENTORY MANAGEMENT AND CONTROL.............................................................67
4.4.1 The need for carrying (holding) inventory ......................................................................68
4.4.2 Inventory strategies .......................................................................................................69
4.4.3 Ordering inventory .........................................................................................................69
4.4.4 Receiving inventory .......................................................................................................71
4.4.5 Storing and physical control of inventory .......................................................................71
4.4.6 Issuing inventory............................................................................................................71
4.5 INVENTORY OF MERCHANDISE ................................................................................73
4.5.1 Cost of merchandise......................................................................................................73
4.5.2 Determining cost of sales ..............................................................................................74
4.5.3 Purchases and sales of merchandise ............................................................................75
4.5.4 Purchases and sales returns .........................................................................................79
4.6 INVENTORY OF MATERIALS.......................................................................................80
4.6.1 Direct and indirect materials ..........................................................................................80
4.6.2 Purchasing and issuing materials ..................................................................................82
iv
All rights reserved
Printed and published by the
University of South Africa,
Muckleneuk, Pretoria
MAC1501/1/2018-2020
70505632
Page layout done by department
, CONTENTS
Page
INTRODUCTION .......................................................................................................................ix
(a) Welcome ........................................................................................................................ ix
(b) Purpose of this module ................................................................................................... ix
(c) Assumed knowledge and skills ....................................................................................... ix
(d) Module outcomes ........................................................................................................... ix
(e) Learning package for this module ................................................................................... ix
(f) Approach to teaching and learning .................................................................................. x
(g) A note on decimals ......................................................................................................... xi
(h) Conclusion...................................................................................................................... xi
LEARNING UNIT 1: INTRODUCTION TO MANAGEMENT ACCOUNTING ............................. 1
1.1 INTRODUCTION ............................................................................................................ 2
1.2 MANAGEMENT AND FINANCIAL ACCOUNTING ......................................................... 3
1.2.1 Financial accounting ....................................................................................................... 3
1.2.2 Management accounting ................................................................................................ 5
1.2.3 A brief history of management accounting ...................................................................... 5
1.3 FUNCTIONS OF A MANAGEMENT ACCOUNTING SYSTEM ....................................... 7
1.4 SELF-ASSESSMENT QUESTIONS ..............................................................................11
1.5 SOLUTIONS TO SELF-ASSESSMENT QUESTIONS ...................................................13
LEARNING UNIT 2: BASIC CONCEPTS OF COST ACCOUNTING ........................................15
2.1 INTRODUCTION ...........................................................................................................16
2.2 TYPES OF BUSINESS ORGANISATIONS ...................................................................16
2.3 COSTING TERMINOLOGY ...........................................................................................17
2.3.1 Cost concepts................................................................................................................17
2.3.2 Cost classification ..........................................................................................................18
2.4 THE FLOW OF COSTS IN A MANUFACTURING ENVIRONMENT ..............................28
2.5 SELF-ASSESSMENT QUESTIONS ..............................................................................32
2.6 SOLUTIONS TO SELF-ASSESSMENT QUESTIONS ...................................................35
LEARNING UNIT 3: COST ACCOUNTING SYSTEMS ............................................................37
3.1 INTRODUCTION ...........................................................................................................38
3.2 ELEMENTS OF A COST ACCOUNTING SYSTEM .......................................................38
iii
.......
MAC1501/1
, 3.2.1 Basis for measuring production input costs....................................................................39
3.2.2 Methods for the valuation of finished goods ...................................................................45
3.2.3 Methods for assigning overheads to production .............................................................49
3.2.4 Methods of cost accumulation .......................................................................................52
3.2.5 Cost-flow assumptions...................................................................................................53
3.2.6 Currency of inventory system information ......................................................................54
3.2.7 Conclusion.....................................................................................................................54
3.3 SELF-ASSESSMENT QUESTIONS ..............................................................................55
3.4 SOLUTIONS TO SELF-ASSESSMENT QUESTIONS ...................................................57
LEARNING UNIT 4: ACCOUNTING FOR PURCHASED INVENTORIES ................................59
4.1 INTRODUCTION ...........................................................................................................60
4.2 CATEGORIES OF INVENTORY ...................................................................................60
4.2.1 IAS 2 – inventory ...........................................................................................................60
4.2.2 Merchandise ..................................................................................................................61
4.2.3 Finished goods ..............................................................................................................61
4.2.4 Work-in-progress ...........................................................................................................62
4.2.5 Materials ........................................................................................................................62
4.2.6 Consumables ................................................................................................................63
4.3 PURCHASED INVENTORY ..........................................................................................64
4.3.1 Cost of purchased inventory ..........................................................................................65
4.3.2 Inventory systems..........................................................................................................65
4.4 INVENTORY MANAGEMENT AND CONTROL.............................................................67
4.4.1 The need for carrying (holding) inventory ......................................................................68
4.4.2 Inventory strategies .......................................................................................................69
4.4.3 Ordering inventory .........................................................................................................69
4.4.4 Receiving inventory .......................................................................................................71
4.4.5 Storing and physical control of inventory .......................................................................71
4.4.6 Issuing inventory............................................................................................................71
4.5 INVENTORY OF MERCHANDISE ................................................................................73
4.5.1 Cost of merchandise......................................................................................................73
4.5.2 Determining cost of sales ..............................................................................................74
4.5.3 Purchases and sales of merchandise ............................................................................75
4.5.4 Purchases and sales returns .........................................................................................79
4.6 INVENTORY OF MATERIALS.......................................................................................80
4.6.1 Direct and indirect materials ..........................................................................................80
4.6.2 Purchasing and issuing materials ..................................................................................82
iv
