chapter  10
11 Pages


After reading Part 1 of this book you will have no doubt recognised that the profitability of an organisation depends on the revenues generated and the costs incurred. Expenses will be classified in different ways, depending on the nature of the products and services used in generating the said revenues. These expenses (or costs) will range from the purchase of stock (as we saw with, to the provision of services (such as lifeguards so that you can use your local swimming pool) to the provision of miscellaneous items (for example, security for Sir Alex Ferguson on match days at Old Trafford). In financial accounting these expenses are all aggregated up and classified by generic type for reporting purposes. However, there is often a need to classify costs in a much more sophisticated manner to ensure that management can plan, make decisions and control an organisation more effectively – this is where management accounting comes in and is the focus of Part 2.