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Why do companies use cost accounting system?

What is cost accounting? Why do companies use cost accounting system? When did it started and the reason/s behind it? What are the Pros and Cons of utilizing the cost accounting system? Research a company that utilizes the cost accounting system for financial management, how has that company improved since using cost accounting system? Would you recommend it and why?

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The purpose of this discussion is to give you a starting place and an exemplar of how this topic might be approached. I know it is very hard to start such an open-ended assignment. The best use is to read and then put it down and write in your own words, adding ideas from other sources or from your own reasoning that is promptly by your reading of my ideas. This is not intended to be "turn in ready" as experts are never permitted to complete essays. Please use this assistance in the spirit in which it was given.


Cost accounting provides financial and non-financial information to managers and decision-makers to show them how resources are being use, acquired and needed for initiatives and business activities. Cost accounting is not restricted to set norms as financial accounting and so can be customized for each business. For instance, many managers prefer not to include fixed costs in their inventory amounts, even though this is not GAAP. It facilitates clear understanding about costs, as fixed costs are not a per-unit cost. The name, cost accounting, implies that it tracks costs, which is a primary focus. Knowing the cost of products and services helps to ensure that pricing covers the costs and an adequate return is made given risks and costs of capital. But cost accounting is broader than just understanding costs, it also works to forecast and give feedback about performance, create and monitor controls over process and assets, and support strategic decisions with timely, relevant and reliable information.


It is difficult to say when cost accounting began because formal record keeping was fairly spotty until recent history. There are signs that record-keeping to track profits and internal controls go back to the start of commercial transactions (Stone, 1969). While information about costs surely helped merchants to price their goods to ensure viability of the trade and to earn a profit back to the first trading days, it wasn't until factories began to mass produce and the owner was not the same as the manager (professional management as agent) became normal that formal costing systems began to be used widely. While records are sparse to be exact about their origin, clearly those with large-scale operations were the ...

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Your tutorial 1,209 words plus 6 references (five peer review, one textbook) and includes sections on overview, history, uses, pros and cons, and the story of an air conditioner manufacturer.