• Unit 1: Cost Measurement and Estimation

    We begin by examining the differences between financial and managerial accounting. The primary difference pertains to the audience:  who will read the reports? Financial accounting information is geared toward external users, while managerial accounting is for internal users. Managerial accounting is integral to making operational and strategic decisions.

    In this unit we examine the manufacturing process and related financial accounting transactions, so you can differentiate between costs assigned to products and costs assigned to a period of time. The flow of costs in accounting mirrors the physical flow of the inventory. For example, a pizza parlor buys the direct materials they put on their pizzas (cheese, tomatoes, and pepperoni). When a customer orders a pizza, the restaurant assembles the direct materials, bakes (work in process) and completes a pizza (finished goods), and delivers it to the customer.

    Completing this unit should take you approximately 5 hours.