Cost Accounting. An Overview

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Cost accounting entails tracking, recording, and analysis of the costs associated with the activities of an organization in producing goods or services.

In principle, cost accounting is a procedure for recording and reporting the results of measurement of the cost of making goods or services. It involves performing the inventory valuation and income determination for the accumulated cost.

Cost is defined as the time and resources required to produce a good or render a service, and by convention measured using the currency unit.

There are three usual approaches to cost accounting, which is the standard fee (standard costing), cost based on activity (activity-based costing (ABC)), and the cost based on the results (throughput accounting).

Cost accounting has undergone dramatic changes, which saw the development of a computer system eliminate manual bookkeeping. Accounting costs have now become a real need in all organizations including banks, professional organizations and government agencies.

Nowadays, many companies are installing new methods of manufacturing, trading, and providing services with the help of computers. This technology has greatly affected the cost accounting practice.

Breakdown of cost elements is done according to the nature of the factors used for production, which include;

    – Personnel costs (wages, salaries, expenses for severance and pension, social expenses, etc.)
    – Material costs (raw materials, auxiliary materials, consumables, intermediates, etc.)
    – Service charges (inclusive of public charges, transportation, energy, consulting, insurance, etc.)
    – Cost of capital (interest, dividends)
    – Area costs (rental, cleaning)
    – Assigned costs

On operational functions

    – Procurement (material)
    – Production costs
    – Distribution costs (operational accounting sheet)
    – Administrative costs (cost center accounting)
    – Tax cost

There are a number of cost accounting lessons all of which are always associated with costs that may arise in the production process. Learning is done in cost accounting, among others, concerning the determination of cost of products, the cost of the process, financing: variable costs, fixed costs, overhead costs, departmental overhead costs, raw material costs, labor costs: direct and indirect , cost control, and analysis of marketing costs.

Cost accounting is one branch of accounting which is used to monitor and record the transaction costs systematically, and provide cost information in the form of cost reports to management. Benefit costs provide information required by management in managing the company, namely for the planning and control income; basic pricing of products and services.

Cost objective is as an item or activity for which cost is accumulated and measured, and some activities or items that can become the object of cost include products, batch of similar units and product lines (strategic objective).



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