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cost accounting value to an organization

1. Does cost accounting differ from financial accounting? If so, how? When is cost accounting valuable to an organization? Where is cost accounting information stored and maintained?

2. If cost accounting serves internal more than external purposes, do ethics matter not only in the development of the cost accounting system but also the uses of the output from the system?

3. With the multitude of cost classifications, how does an organization precisely identify which costs belong where? How does an organization determine how costs behave? Consider payroll costs?what really drives them? Are there different drivers for different employees?

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Does cost accounting differ from financial accounting? If so, how? When is cost accounting valuable to an organization? Where is cost accounting information stored and maintained?

Yes, cost accounting, which is a kind of managerial accounting, is different from the financial accounting. The key difference between financial and managerial accounting is that financial accounting is aimed at providing information to parties outside the organization, whereas cost accounting information is aimed at helping managers within the organization make decisions.

source: http://www.investopedia.com/terms/f/financialaccounting.asp

Further, cost accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information.

source: http://en.wikipedia.org/wiki/Differences_between_managerial_accounting_and_financial_accounting

Accurate costing all the way down to the product, unit, service, or activity level is a prerequisite for effective decision making and efficient resource allocation. But in aggregate financial reporting, only the totality of expenses is needed to calculate net income and so accuracy at the product or activity level is irrelevant: After costs have been incurred, the totals remain the same however costs are allocated.

source: http://www.rand.org/pubs/monograph_reports/MR1261/MR1261.appb.pdf.

Further, the time span of financial accounting is quarterly and annually whereas cost accounting can be done when needed and is not for a predetermined fixed period.

Cost accounting is valuable to an organization if it significantly improves ...

Solution Summary

Does cost accounting differ from financial accounting? If so, how? When is cost accounting valuable to an organization? Where is cost accounting information stored and maintained?

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