Why Is Cost Accounting so Important in an Organization

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Abstract Cost accounting is a very important part of the management accounting process. In order for managers to determine the best methods to increase a company's profitability, as well as saving company money in the future, cost accounting is a necessary system in the management of a company's budget, providing important data to analyze fluctuation in company production costs. It creates a financial value out of the production of a product, measuring currency that is nominal into units that are measured by convention. Cost accounting is the accounting of the cost. It is made of two words- Cost and Accounting. The term cost denotes the total of all expenditures involved in the process of production. Thus, it covers the costs involved in the production and the cost involved while receiving it. Accounting, on the other hand, collects and maintains financial records of each income and expenditure and make avail of such information to the concerned officials. It is a practice and process of cost which determines the profitability of a business concern by controlling the cost with the application of accounting principle, process and rules. Cost accounting provides cost sheet, statement of material and labor utilization and some other reports like budget which can be used immensely for comparing the standard cost. After this, businessman can decide best price of products. We can also compile the following information of cost accounting which can be used for business decision making. It creates a financial value out of the production of a product, measuring currency that is nominal into units that are measured by convention. By taking recorded historic costs a bit further, cost accounting allocates a company's fixed costs over a specific time period to what items are actually produced during that period of time, creating a total cost of product

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