Cost Accounting
Cost accounting refers to a form of managerial accounting in which all expenses within a supply chain is considered and the actual cost associated with manufacturing a product or providing a service is determined.
Updated: November 28, 2023
Cost accounting refers to a form of managerial accounting in which all expenses within a supply chain is considered and the actual cost associated with manufacturing a product or providing a service is determined. Managers can decide which products and services are most profitable and which need improvement by assessing the variable and fixed costs at every step of production.
Internal management can make future business decisions by measuring financial performance. Accounting software can be used by companies to streamline the financial management process to make sure all costs are accounted.
Input costs are compared with output results by cost accounting to measure financial performance and inform future business decisions. Standard cost, Activity-based cost (ABC), Lean accounting, Marginal costing are the four primary methods of cost accounting. Fixed costs, Variable costs, Direct costs, Operating costs and Indirect costs are some of the additional types of costs used in cost accounting.
Cost accounting is understanding where a company earns and loses money. It also provides input for future decisions related to profit and crucial for analyzing, reporting, and helping improve internal cost controls and efficiency. It can also be used for management in budgeting and monitoring cost control programs, which can increase the future net margins of a company.
Types of cost accounting
- Job Order Costing
- Process Costing
- Activity-Based Costing (ABC)
- Variable Costing
- Absorption Costing
- Marginal Costing
- Life Cycle Costing
- Target Costing
- Kaizen Costing
- Lean Accounting
