Cost Accounting - Get Maximum Information

Cost accounting often often called managerial or management accounting, is the branch of accounting that provides economic and financial information to decision makers within a company. The idea of providing information for use within the company (to aid management to plan, direct, and control operations) differentiates Cost Accounting from other segments of the accountancy profession. This public information is prepared and introduced based on usually accepted accounting principles (GAAP), the broad rules that assure the user of the underlying framework supporting the information.

On the other hand, cost accounting is limited predominantly to make use of within the company to aid management in the process of making choices that will benefit the stockholders by maximizing company profits that translate in to maximizing stockholder wealth. Since the information is used internally, the information may be introduced on any logical basis as long as it will aid the manager to reach an appropriate, informed decision.

A few ideas in cost accounting, however, form the bridge between Financial Accounting and managerial accounting topics. such idea is that of product costing for a manufacturing company. Not only is this information used internally in decision making (e.g., does a company make or buy a part?), product costing is also used to decide the historical basis to account for the cost of products sold in the coursework of a period and the cost of the unsold stock that remains as an asset on the statement of financial position at the finish of the period.

Numerous cost accounting ideas can benefit management in decision-making, both for manufacturing and service companies. While plenty of of the ideas discussed below are applicable to both types of companies, the basis for ease of discussion will be that of a manufacturing company. Therefore, some of the ideas to be discussed include understanding the distinction between manufacturing and non-manufacturing costs (and how these are disclosed in the financial statements), computing the cost of manufacturing a product (or providing a service), identifying cost behavior in order to utilize cost-volume-profit relationships, setting prices, budgeting and budgetary controls, and capital budgeting.