Kayla Nguyen

Research

19 February 2020

Evidence of Learning #4

There are many different types of accounting such as financial, tax, government,

fiduciary and forensic accounting. For my final in particular, one of the types of accounting that

was relevant to know when starting a business is cost accounting. In short, cost accounting is the

recording of all the costs of a business, like manufacturing, in a way that can be used to improve

its management. This is why some classify cost accounting as a facet of managerial accounting.

Cost accounting aims to capture the total cost of a company’s production of a good or the

overall cost of performing a service. This is useful when it comes to making business decisions

and it is also not as rigid as financial accounting because there is not a required set of standards

to follow and cost accounting can be flexible to meet the needs of management. Costs are always

going to be shifting and it is important to keep track of them with a platform like QuickBooks or

another form of bookkeeping.

There are five main types of costs. Fixed costs are costs that do not vary depending on the

level of production, meaning that they remain constant over a period of time and do not

fluctuate; these could be a lease payment on a building or insurance. Variable costs are the

opposite of fixed costs; these are tied to a company's level of production and are based on the

amount of output. So, labor, raw materials, operational expenses. This leads into the next

categorization of costs called the operational costs. These can either be fixed or variable costs,

but they depend on the situation, and are associated with a business’ day-to-day operations.

Lastly, there are direct and indirect costs. Direct costs are related to the production of a
production such as paying someone to mix concrete. The direct costs of the concrete include the

labor hours of the worker and the actual cost of the material. For indirect costs, these cannot be

directly linked to the product. For example, utilities costs are considered to be indirect costs

because you must keep your lights and electricity on regardless of whether your company is

struggling or flourishing.