Cost accounting: This procedure includes an assessment of a company’s variable and Fixed costs involves in each stage of productions.
Types of Cost accounting-
- Direct cost accounting- Only variable cost considered for cost accounting. This process generally used for short term decision making.
- Standard costing: is a estimation of cost that incur in a production process. It helps to prepare company’s budget in advance.
- Marginal costing: A company determines the number of units to produce and decide cost structure based on that.
- Historical costing: Under this method financial statement records the price of an asset as per original cost incurred.
Various methods of costing
- Job costing: The cost involved in a particular job or product . No preproduction cost is used in this method.
- Batch costing: It involves a production process where a company keeps producing the goods in batches , irrespective of order or demand
- Process costing: It is used by companies, that conduct large scale productions use this methods to calculate per unit cost involved in a production
- Contract costing: It helps calculate the expenses incurred when a company takes on contractual work. For instance, construction companies use this method of costing. ?
- Variable cost: Variable costs change as per the production procedure and level.
- Fixed cost: Are fixed expenses involved in production.
- Sunk cost: Sunk costs refer to the expenses which are not recoverable in future.
- Opportunity Cost: Opportunity costs include the expenses you incur while choosing one production option over the other.
Cost accounting vs Financial accounting
- Cost accounting targets the company, its management, and its staff. financial accounting deals with public firms and helps lenders, stakeholders.
- The cost accounting technique is used by industrial enterprises. ?Financial accounting techniques to manage expenses.
- Cost accounting helps predict or forecast expenses by implementing budgeting strategies. However, it is not possible in financial accounting.