Introduction to Cost Accounting

Types of Business Entities Two Basic Product-Costing Systems

 Service Job order costing
 Merchandising
 It collects all manufacturing costs and assigns
 Manufacturing
them to a specific job or batch of product.
 It measures costs for each completed job rather
Financial vs Managerial vs Cost Accounting than a set of time periods
 It uses just one work in process inventory
 Financial Accounting – accounting information control. Each job has its own subsidiary ledger
for reporting to external parties such as
investors, regulators and creditors. Base in Process costing
historical, quantitative monetary and verifiable.
 Manufacturing costs are grouped by department
 Managerial Accounting – focuses on needs of
or work center
parties within the organization on divisional or
 Emphasizes weekly or monthly time periods
individual concerns. Based on current or
rather than to complete order
forecasted, quantitative or qualitative, monetary
 Uses several works in progress
or non-monetary and most of all timely.
 Cost Accounting – intersection between
financial and managerial accounting

Merchandising vs Manufacturing
 Merchandising – involves finished goods to
goods sold
 Manufacturing – from raw materials to finished
goods to goods sold

Use of Cost Accounting Data

Determining Product Cost
 Determining the selling price of a product
 Meeting competition
 Bidding contracts
 Analyzing profitability
Planning and Control
 Strategic Planning – long term goals and
objectives
 Tactical Planning – shorth range plans to
achieve long term goals
 Operations planning – day to day operations