Course Outline
Join PRO

What is cost accounting?

Author:
Harold Averkamp, CPA, MBA

Definition of Cost Accounting

Cost accounting is involved with the following:

  • Determining the costs of products, processes, projects, etc. in order to report the correct amounts on a company’s financial statements, and
  • Assisting management in the planning and control of the organization
  • Preparing special analyses that assists in making the best decisions

Examples of Cost Accounting

A significant part of cost accounting involves the unit cost of a manufacturer’s products in order to report the cost of inventory on its balance sheet and the cost of goods sold on its income statement. This is achieved with techniques such as the allocation of manufacturing overhead costs and through the use of process costing, operations costing, and job-order costing systems.

Cost accounting assists management to plan and control the business through budgeting for operations, capital budgeting for expanding operations, standard costing and the reporting of variances, transfer pricing, etc.

Special analyses includes cost behavior, cost-volume-profit relationships, make or buy decisions, selling prices for products, activity-based costing, and more.

Cost accounting had its roots in manufacturing businesses. However, today it extends to service businesses. For example, a bank will use cost accounting to determine the cost of processing a customer’s check and/or a deposit, maintaining a checking account, processing international wire transfers, servicing a mortgage loan, etc. This in turn may provide management with guidance in the pricing of various services.

Join PRO to Track Progress

Features

Free

PRO

Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Dictionary
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Flashcards
Crossword Puzzles
Word Scrambles with Coaching
Bookkeeping Study Guide
Managerial and Cost Accounting Study Guide
Certificates of Achievement
Bookkeeping Certificate of Excellence
Business Forms
Printable PDF Files
Progress Tracking
Motivational Badges and Points
Motivational Medal Rankings
Motivational Activity Streaks
Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,033 Testimonials

PRO for Teams
  • Easily onboard new users and team admins
  • Monitor individual user progress and grades
  • Monitor team progress and compare users
  • View average grades and find problem areas
  • Monitor recent activity and user achievements
PRO for Teams
Take the Tour Join Pro Upgrade to Pro