Cost Accounting
Cost accounting is a form of managerial accounting that aims to capture
a company's total cost of production by assessing the variable costs of
each step of production as well as fixed costs, such as a lease expense.
Cost accounting is not GAAP-compliant, and can only be used for
internal purposes.
• Cost accounting is used internally by management in order to make
fully informed business decisions.
• Unlike financial accounting, which provides information to external
financial statement users, cost accounting is not required to adhere to set
standards and can be flexible to meet the particular needs of
management.
• As such, cost accounting cannot be used on official financial
statements and is not GAAP-compliant.
• Cost accounting considers all input costs associated with production,
including both variable and fixed costs.
• Types of cost accounting include standard costing, activity-based
costing, lean accounting, and marginal costing.
Types of Costs
• Fixed costs are costs that don't vary depending on the level of
production. These are usually things like the mortgage or lease
payment on a building or a piece of equipment that is depreciated
at a fixed monthly rate. An increase or decrease in production
levels would cause no change in these costs.
• Variable costs are costs tied to a company's level of production.
For example, a floral shop ramping up its floral arrangement
inventory for Valentine's Day will incur higher costs when it
purchases an increased number of flowers from the local nursery
or garden center.
Cost accounting is a form of managerial accounting that aims to capture
a company's total cost of production by assessing the variable costs of
each step of production as well as fixed costs, such as a lease expense.
Cost accounting is not GAAP-compliant, and can only be used for
internal purposes.
• Cost accounting is used internally by management in order to make
fully informed business decisions.
• Unlike financial accounting, which provides information to external
financial statement users, cost accounting is not required to adhere to set
standards and can be flexible to meet the particular needs of
management.
• As such, cost accounting cannot be used on official financial
statements and is not GAAP-compliant.
• Cost accounting considers all input costs associated with production,
including both variable and fixed costs.
• Types of cost accounting include standard costing, activity-based
costing, lean accounting, and marginal costing.
Types of Costs
• Fixed costs are costs that don't vary depending on the level of
production. These are usually things like the mortgage or lease
payment on a building or a piece of equipment that is depreciated
at a fixed monthly rate. An increase or decrease in production
levels would cause no change in these costs.
• Variable costs are costs tied to a company's level of production.
For example, a floral shop ramping up its floral arrangement
inventory for Valentine's Day will incur higher costs when it
purchases an increased number of flowers from the local nursery
or garden center.
