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Cost Accounting and Applications

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What is cost accounting and how do we best use it?

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Question

What is cost Accounting and how do we best use it?

Answer

Cost Accounting

Cost Accounting is a process of accounting for cost which begins with the recording of income and expenditure or the bases on which they are calculated and ends with the preparations of periodical statements and reports for ascertaining and controlling costs.

Objective of Cost Accounting

The main objectives of cost accounting are as follow:
(i)Ascertainment of cost
(ii)Determination of selling price
(iii)Cost control and cost reduction
(iv)Ascertaining the profit of each activity
(v)Assisting management in decision making

Cost accounting is helpful in making a number of business decisions. By weighing the actual costs versus the anticipated benefit, cost accounting can help a company to avoid launching a product with no real market, prevent the purchase of unnecessary goods and services, or alter the current operational model in a manner that will increase efficiency. Whether utilized to evaluate the status of a department within the company or as a tool to project the feasibility of opening new locations or closing older ones, cost accounting can provide important data that may impact the final decision.
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Solution Summary

This solution of 767 words explains cost accounting, its objectives, and it's applications in a business setting with examples.

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