cost accounting

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cost accounting:

see accountingaccounting,
classification, analysis, and interpretation of the financial, or bookkeeping, records of an enterprise. The professional who supplies such services is known as an accountant. Auditing is an important branch of accounting.
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Cost Accounting


an area of accounting based on the grouping of expenditures included in the prime cost of a unit of output as shown in cost calculations (seeCALCULATION, COST). Cost accounting provides a complete and timely determination of all production costs and makes it possible to monitor the attainment of such goals as lowering unit costs and observing norms governing the expenditure of raw materials, supplies, fuel, and energy; it also identifies reserves for reducing unit costs, promotes economies, and aids in profit-and-loss accounting at socialist enterprises.

In the USSR, production costs are reflected in accounts of primary production and auxiliary production. These accounts in turn are broken down to include, for example, each shop, stage of manufacture, and order. Expenditures on production are either direct or indirect. Direct expenditures are included immediately in the prime costs of products; they appear as a debit in the primary production account (with raw materials and wages accounts being credited). Indirect expenditures are included in prime costs on a pro rata basis, with apportionment governed by industry practice. These expenditures are initially debited to general overhead accounts for equipment maintenance and for indirect expenses incurred by the shop or plant (amortization, current repair; labor protection, wages for shop personnel, maintenance of shop buildings, losses from downtime; administrative expenses, maintenance of storage areas, wages for warehousemen). These expenditures are included in the prime cost at the end of the month. The indirect expenditures are added to the unit costs of items in proportion to, for example, the wages of production workers, expenditures on manufacturing, equipment operating time, the weight of raw materials, and wage estimates.

Output of finished goods is reflected in the actual unit costs on the credit side of the primary production account. The debit balance of this account shows work in process, which is determined periodically through an inventory of materials in the shops (at the work stations). Losses from flaws and defects are listed in a separate account, and after deductions are made for any applicable refunds, the balance of this account is included in the prime cost of production. The expenditures of shops servicing the main production shops are entered in the auxiliary production account. These expenditures, which include those of repair shops, traffic departments, and boiler rooms, are later entered on the debit side of the primary production account.

Cost accounting makes use of a variety of methods. The simplest method is that used in extractive industries, where all expenses incurred in obtaining a certain type of product are added together. Different methods are used in manufacturing industries. In cases where only a small number of goods are produced, for example, large machines, ships, and bridges, the accounts are tied to the customer’s order. In other manufacturing industries, expenses are initially broken down for each stage of production (in textile production, for spinning, weaving, and finishing) and then are apportioned among the finished goods; this method requires a calculation of the unit costs of intermediate products (yarn, unbleached cloth). A third cost accounting method in manufacturing industries is based on norms. This method is the most progressive because expenses are reckoned on the basis of norms, deviations from norms, and changes in norms. The normative method is favored in large-scale machine production and in industries where the finished goods (footwear, clothing) comprise different types of components. A daily reckoning of deviations from norms makes possible a tighter control over production costs.


cost accounting

[′kȯst ə′kau̇nt·iŋ]
(industrial engineering)
The branch of accounting in which one records, analyzes, and summarizes costs of material, labor, and burden, and compares these actual costs with predetermined budgets and standards.
References in periodicals archive ?
Summary: Management accounting is the art and science of collecting, managing, interpreting and applying financial information to business decisions, but like a proverbial Dr Frankenstein, have the management accountants created a monster that now has a life of its own?
1987),Relevance Lost: The Rise and Fall of Management Accounting, Boston; Harvard Business School
The new AICPA and CIMA joint venture will promote and establish the CGMA as the preeminent, globally recognized management accounting designation.
Chenhall, 1994, "The Usefulness of Management Accounting Systems, Functional Differentiation, and Managerial Effectiveness," Accounting, Organizations and Society, 19(1):1-13.
The comparison of the behavioral assumptions of the traditional view of behavior with those of the modern organization theory model suggests that the traditional model does not represent a valid framework for the design and operation of behaviorally sound management accounting systems.
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I was truly amazed at the level of enthusiasm and passion for management accounting and IMA that these individuals demonstrated.
Advisable factors were identified as potential factors in designing effective strategic management accounting due to common structural-organizational theory which refers to paradigm of structure strategy operation of Anderson and Lanen [2].
In addition, the diffusion of management accounting innovation involved several techniques but the adoption of the techniques is limited to certain techniques such as ABC, BSC and ABM.
Numerous studies have provided evidence about the positive contribution of management accounting tools with regard to organisational planning, control and performance improvement.
Boisvert was involved with a study analyzing the use of these management accounting tools in a number of Quebec businesses, through the CMA International Centre for Studies of Business Processes.

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