Defining Cost Accounting
Cost accounting is a kind of accounting which targets to record a firm’s price of production by analysing the price at every stage of production also fixed expense example, depreciation of machineries. This method calculates cost individually first and then compare it with actuals for measuring finances of the firm.
Explaining Cost Accounting
Financial accounting is basically used for or by other companies to judge a company whereas Cost Accounting is used for a companies’ internal purpose. Financial accounting is also a showcase of financial results that also has a company’s liabilities and assets. This process can be extremely important as a key for administration in finances and in starting cost control regulations that can improve total profit for the firm in future.
One main change between financial and cost accounting is that the cost is a secret in financial accounting (in most cases), cost accounting is assigned a cost according to the administration Cost accounting, die to it is used as an company tool by administration, don’t have to set any particular regulations and is fixed by the general principles and hence its value may differ from place to place.
Development of Cost Accounting
It has been said that cost accounting was discovered and used during revolutions of industries when the incresing demand compelled industrialists to think whether to reduce the cost of their over stocked products or decrease production capacity.
In the early 19th century when T. R. Malthus and David Ricardo were discovering the topic of economic theory, writers such as Charles Babbage were on their first books written to show businesses world on how to manage internal cost accounting.
Types of Cost Accounting
- Standard Cost Accounting
- Activity Based Costing
- Lean Accounting
- Marginal Costing