Today – 21/07/20 – on Journals with Accounting we feature a concept under the course – Cost Accounting. This is brought to you by NUASA OAU and FabReads.
Cost accounting is defined as “a systematic set of procedures for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs.” Often considered a subset of Managerial accounting.
It will first measure and record these costs individually, then compare input costs to output results to aid in measuring financial performance and making future business decisions. There are many types of costs which are as follows;
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- Fixed Cost.
- Variable cost.
- Direct Cost.
- Indirect Cost.
- Operating cost.
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Difference Between Cost Accounting and Financial Accounting
While Cost Accounting is often used by management within a company to aid in decision making, Financial Accounting is what outside investors or creditors typically see.
Financial accounting presents a company’s financial position and performance to external sources through financial statements, which include information about its revenues, expenses, assets, and liabilities.
One key difference between cost accounting and financial accounting is that, while in financial accounting the cost is classified depending on the type of transaction, cost accounting classifies costs according to the information needs of the management.