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Cost Accounting Systems
- By Ashraful Rasel
- Published 26 September 2009
- Report, Assignment, Case Study and Term Paper
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All kinds of organizations - manufacturing firms, service companies,
and nonprofit organizations - need some form of cost accounting, that
part of cost management system that measures costs for the purpose of
management decision making and financial reporting. Managers rely on
accountants to design a cost accounting system that measures costs to
meet each of the three purposes of a Cost Management Systems(CMS). The
role of the Cost Accounting Systems can not be denied in each and every
manufacturing organizations.
Cost Accounting is that part of the cost management system that measures costs for the purpose of management decision making and financial reporting. The cost accounting system typically includes two processes:
1. Cost accumulation: Collecting costs by some "natural" classification such as materials or labor, or by activities performed such as order processing or machine processing.
2. Cost assignment: Tracing or allocating costs to one or more cost objectives such as activities, processes, departments, customers, or products.
Cost: A sacrifice or giving up of resources for a particular purpose, frequently measured by the monetary units that an organization must pay for goods and services.
Cost object: Anything for which decision makers desire a separate measurement of costs. Examples include departments, products etc.
Direct costs: Costs that can be identified specially and exclusively with a given cost objective in an economically feasible way.
Indirect costs: Costs that can not be identified specifically and exclusively with a given cost objective in an economically feasible way.
Cost allocation: Assigning indirect costs to cost objects using plausible and reliable cost drivers.
Unallocated costs: Costs for which we can identify no relationship to a cost objective.
Product costs: Costs identified with goods produced or purchased for resale.
Period costs: Costs that become expenses during the current period without going through an inventory stage.
Cost pool: A group of individual costs that a company allocating to cost objectives using a single driver.
Cost Accounting is that part of the cost management system that measures costs for the purpose of management decision making and financial reporting. The cost accounting system typically includes two processes:
1. Cost accumulation: Collecting costs by some "natural" classification such as materials or labor, or by activities performed such as order processing or machine processing.
2. Cost assignment: Tracing or allocating costs to one or more cost objectives such as activities, processes, departments, customers, or products.
Cost: A sacrifice or giving up of resources for a particular purpose, frequently measured by the monetary units that an organization must pay for goods and services.
Cost object: Anything for which decision makers desire a separate measurement of costs. Examples include departments, products etc.
Direct costs: Costs that can be identified specially and exclusively with a given cost objective in an economically feasible way.
Indirect costs: Costs that can not be identified specifically and exclusively with a given cost objective in an economically feasible way.
Cost allocation: Assigning indirect costs to cost objects using plausible and reliable cost drivers.
Unallocated costs: Costs for which we can identify no relationship to a cost objective.
Product costs: Costs identified with goods produced or purchased for resale.
Period costs: Costs that become expenses during the current period without going through an inventory stage.
Cost pool: A group of individual costs that a company allocating to cost objectives using a single driver.
Ashraful Rasel
H.S.C from Gazipur Cantonment Board College; BBA & MBA from Dhaka University major in Accounting and Information Systems.
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Article Series
This article is part 3 of a 3 part series. Other articles in this series are shown below:
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Cost Accounting Systems
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2 Responses to "Cost Accounting Systems"
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said this on 11 Oct 2009 2:06:09 PM CST
Thanks for this. it is somehow helpful for me and also for others.
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Author/Admin)|
said this on 12 Dec 2009 8:44:50 AM CST
thanx frd, it is so important for management student........
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