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. Activity-Based Budgeting - ABB

    A method of budgeting in which the activities that incur costs ...
RELATED FAQS
  1. How do some contra account types reduce book value?

    Typical examples of overhead in cost accounting include indirect labor, indirect materials, utilities and depreciation. A ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. Why is the use of contra accounts so important for maintaining ledgers?

    Contra accounts have been used in financial accounting to verify the balance of another corresponding account since Renaissance ... 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

    When & Why Should a Company Use LIFO

    By using LIFO (last in, first out) when prices are rising, companies reduce their taxes and also better match revenues to their latest costs.
  7. Fundamental Analysis

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  8. Retirement

    How Much Is Enough To Finance Your Retirement?

    Keep these points in mind as you calculate your retirement asset goal.
  9. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  10. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center