What is Cost Accounting?

To provide a correct and accurate information, some manager originated cost accounting. The cost accounting was developed in 1890 or Industrial Revolution. Large industries have applied cost accounting at that time.

It helps manger to determine the cost and expenses of operational company. They can make the decision, considering the cost and the expenditures for a project.

The aim company is making profit. That is why they should reduce the cost and increase the revenue. The cost accounting recognizes the cost such as material, manpower cost and indirect expenses or overhead.

The cost accounting is only for internal company purpose. The accounting manager can make their own report that does not need to meet GAAP principle.

That is why the manager can use variance cost to the standard cost. In reality, the cost of material always changes. It is because the demand of the material is increasing. A Manager will know why the revenue is increasing or why the revenue decreases.

A manager should be clever to buy the cheap material to reduce the costs. They will analyze which cost that can be minimized.

Cost accounting is a branch of managerial accounting. Three are two types of cost accounting: Activity-Based Costing (ABC) and Cost-Volume-Profit Analysis. Both types are different in calculation method.

Activity-Based- Costing calculate the cost base on the amount of work the worker require. A manager can research the most-efficient business. The manager may analysis where and how the employee spend the time.

Cost -Volume-Profit is the easy approach to managing the cost. The productivity affects the cost. The higher productivity, the higher the cost.