Accounting is the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results; (Merriam-Dictionary, 2012). Cost accounting is described as the evaluating approach to the overall cost of when the business evaluates the cost that is associated with the business. Cost accounting consists of the identification, measurement, collection, analysis, preparation, and communication of financial information (Khan, 2010). In this paper, I will discuss the reasons why cost accounting is important to businesses and what role it plays in order for they to succeed. I will also discuss the different methods of cost accounting and how are they used? What does operating a budget help a firm’s management; what are the elements of a budget and how are they constructed.
Businesses use cost accounting to help manager illustrate potential areas to reduce cost and process for services and goods, describes how goods and services should be priced to reflect their true cost (Conway-Schempf & Ph, 2001). Cost accounting is the process of accumulated, measuring, interpreting and the reporting of cost information that is relevant to the stockholders of the business. Managers as well as management use cost accounting to help in justifying the capacity in helping to cut costs for the company in order to increase that company’s profit. Internal use, versus external use tools allow users such as financial accounting, cost accounting who do not need to follow the General Accepted Accounting Principles (GAAP) because they use a more practical type if accounting. The importance of cost accounting," 2011). It also gives managers a good idea of what the actual cost of the processes, depart...
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...ployee and customers to make the company profitable.
Works Cited
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Conway-Schempf, N., & Ph, D. (2001). Full cost accounting: A course module on incorporating environmental and social costs.
Financial terms [Batch cost]. (2012). Retrieved from http://www.finance-lib.com
The importance of cost accounting. (2011).
Khan, M. (2010). How cost accounting serves to management process in an organization inside & how cost accounting is typically utilized.
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Q-finance. (2009). Operating costing. (n.d.). In Operations and production. .
We Learn. (2011, February 3). An introduction to cost accounting [A continuous learning forum]. Retrieved March 13, 2012, from Welingkar Institute of Management: www.slideshare.com.
[3] Robert S. Kaplan and Steven R. Anderson, Time-Driven Activity-Based Costing: A Simpler and More Powerful Path to Higher Profits, Harvard Business Publishing, Boston, Mass., 2007.
This paper is going to identify three type of companies that use different costing systems (job costing system, process costing system, and activity-based costing allocations (ABC) ). Also, this paper is going to compare and discuss the similarities and differences you see in the companies.
This case assignment will discuss managerial accounting and different income statements a business owner may use internal to the company. Divided into two parts, part one will discuss and analyze the difference between managerial and financial accounting, the needs for financial information used for internal purposes. Additionally, it will focus on the managerial accounting profession and how its roles have changed in today’s business. Expanding on the profession, it will comment on the Certified Management Accountant (CMA) certification and how it differs from the CPA certification. Part two of this assignment
Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
[4] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 3, Cost Assignment, p. 54-59
Jackson, S., Sawyers, R., & Jenkins, J. (2009). Managerial Accounting (5th ed.). Fort Worth, TX: Harcourt College Publishers.
Costing as defined by Blocher, Stout, Juras, and Cokins (2016) ‘is the process of accumulating, classifying, and assigning direct materials, direct labor, and factory overhead costs to cost objects, which most commonly are products, services, or projects” (p. 96). Further relayed by Blocher et al. (2016), is the type of costing system a company employs depends on the industry, product or service manufactured or provided, and the benefit versus the cost of the particular system chosen. Job and process costing systems are two different avenues by which companies can accumulate their costs as a first step in determining accurate pricing for their product or service. While one method tracks costs that can be specifically attached to a unique product, batch of products, or service, and then also allocates the overhead to the individual units or services, the other method also tracks the direct costs but accumulates the overhead costs for the shared services used to produce indistinguishable products, then assigns them to a functional department, and from there assigns them to products. Job and process costing system characteristics are examined in further detail, and examples of companies that use each are provided.
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
Cost accounting system has two types, job order costing, and process cost system. These two cost systems are very different, almost every company uses order costing or process costing. Starbucks, is a coffee shop where citizens congregate to drink there morning coffee, study, and or socialize. Starbucks is one of the oldest and largest privately held specialty coffee retailer in the United States. (Starbucks) Their passion is to discover the flavors you love and always bring it home, delivering the look, taste and aroma of the world’s best coffee and teas. Job order costing is a very easy way in order to help Starbucks managers to know how much profit their company (Starbucks) made.
The current cost accounting presents the economic status of the business in relation to the economic which present the reality of the transaction which in turn provides better and more useful information than historical costing. As business environment are rapidly changing and current cost accounting will show the underlying business performance in align to the economy to present a fair value in the balance sheet. As the information acquired is debatable it can provide much more meaningful information to the user as it reflects the current price. Another advantage is that current cost accounting provides better measurement of efficiency. The rapid development and abundance use of contract based business means that under cost-based system there are some assets and liabilities are not included in the balance sheet at all because it has not been incurred or are not showed due to circumstances like the exchange rate, interest rate and even tax rates. Current cost is the only way to get these changes in prices to be record as it reflects on the market price. The disadvantage of current cost accounting is that understanding current cost accounting and interpreting it to useful and relevant data can be much more difficult to be achieved as it requires much more in depth knowledge. Some investor thinks that the financial information report is too little as they are no
In its current practice, the roles and functions of cost accounting includes additional functions. More specifically, it can be described as more than an inventory tracking system. This is because cost accounting entails defining the charges of activities and goods (Horngren & Srikant, 2000). Because of its many roles and functions, this accounting method has been of great help to growth and expansion of business planning and management. Again, the reports offer assistance in the planning and growth projections for different business functions and units within the organization. The information cost accountants offer different uses, some of which aid in the controllership function, as well as the industrial
"College Accounting Coach." Process Costing-Definitions And Features(Part1) « Process Costing « Cost Accounting «. Feb. 2007. Web
Furthermore, it is vital that the company not only use effective cost management, but also adopt an effective accounting method that will help managers achieve goals. Blocher et al (2013) compares and contrast the three types of accounting method that will benefit the firm;
CIMA (Chartered Institute of Management Accountants) defines Management accounting as “the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of information that used by management to plan, evaluate, and control within an entity and to assure appropriate use of an accountability for its resources”. It is not based on the past, but only on the forecast of market current and future trends, and no exact numbers allowed. With this partition, management accounting focuses on offering information and financial suggestions to the people inside of the company, especially the corporate executives, to make business decisions while financial accounting only provides financial statements to external users, such as investors, stockholders, creditors, suppliers, competitors and customers. Management accounting is manager oriented, while financial accounting provides the record of a company’s past performance.
When studied in any reasonable depth, however, process cost is among the most difficult topics covered in cost accounting courses.” They go on to add that the contradiction of being easy to introduce as a concept and being difficult to understand when studied in depth can be traced to a students’ inability to separate relevant data from irrelevant data and the inability to organize a maze of interrelated data into usable form. As is frequently true when dealing with accounting matters, the concept may be relatively simple however the application of the concept is