Cost accounting is an important element of accounting that seeks to reduce the cost of goods or services through various means. This system of accounting is a form of managerial accounting that is used internally within an organization, therefore comparability to other companies is not necessary.
The financial data used in cost accounting can aid decision making, improve performance, and significantly reduce costs regardless of the type of organization that is using it – although it is commonly thought of as a school of accounting used in manufacturing. Improved performance from decreased cost, or improved profit is an important element in business as well, therefore cost accounting is a strong competitive advantage for management of a company.
Cost Accounting Principles
- What is Cost Accounting?
- Functions of Cost Accounting
- Concept of Cost
- Elements of Cost in Cost Accounting
Types of Costs in Cost Accounting
- Finding Cost
- Interest Cost
- Allocating Indirect Expense
- Wage Systems
- Material and Labor
- Compiling Cost Data
- Costs by Financial Statement Classification
Cost Systems & Methods in Cost Accounting
- How to Examine a Plant
- Creating a Cost System
- Estimating Cost System
- Departmental Cost System
- Special Order System – Productive Labor Method
- Special Order System – Process Method
- Employee Time Reports
- Product System – Productive Labor Method
- Product System – Machine Method
The origins of cost accounting started in the Industrial Revolution and was employed by management to monitor fixed and variable costs in the factories which were so prevalent at the time. There are many principles to cost accounting that maximize the efficiency of a business and its production capacity. These can be highly useful in a business to reduce the cost of production. The examples given are mostly manufacturing related, however it is noted that these principles can be applied to several different, abstract types of business fundamentals.