Cost Accounting

AAA

DEFINITION of 'Cost Accounting'

A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.

 

INVESTOPEDIA EXPLAINS 'Cost Accounting'

While cost accounting is often used within a company to aid in decision making, financial accounting is what the outside investor community typically sees. Financial accounting is a different representation of costs and financial performance that includes a company's assets and liabilities. Cost accounting can be most beneficial as a tool for management in budgeting and in setting up cost control programs, which can improve net margins for the company in the future.

 

VIDEO

Loading the player...
RELATED TERMS
  1. Cost-Volume Profit Analysis

    A method of cost accounting used in managerial economics. Cost-volume ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
  3. Financial Accounting

    The process of recording, summarizing and reporting the myriad ...
  4. Variable Cost

    A corporate expense that varies with production output. Variable ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Income Statement

    A financial statement that measures a company's financial performance ...
RELATED FAQS
  1. What are the main objectives of cost accounting?

    Cost accounting is distinct and separate from general financial accounting, which is regulated by generally accepted accounting ... Read Full Answer >>
  2. What are the different types of costs in cost accounting?

    Cost accounting is an accounting process that measures and analyzes the costs associated with products, production and projects ... Read Full Answer >>
  3. How are members of the Cost Accounting Standards Board chosen?

    The Cost Accounting Standards Board, or CAS Board, is an independent board in the Office of Federal Procurement Policy. Five ... Read Full Answer >>
  4. How are fringe benefits calculated?

    Nearly all employers incur costs related to their employees beyond just their wages. Many of these costs are considered "fringe" ... Read Full Answer >>
  5. How are contingent liabilities reflected on a balance sheet

    Contingent liabilities need to pass two thresholds before they can be reported in the financial statements. First, it must ... Read Full Answer >>
  6. How do businesses determine if an asset may be impaired?

    In the United States, assets are considered impaired when net carrying value (book value) exceeds expected future cash flows. ... Read Full Answer >>
Related Articles
  1. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...
  2. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  3. Investing Basics

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  4. Retirement

    Common Clues Of Financial Statement Manipulation

    Search for the "bloody" fingerprints in accounting crimes.
  5. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  6. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  7. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  8. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  9. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  10. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.

You May Also Like

Hot Definitions
  1. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  2. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  3. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  5. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
Trading Center