Are you concerned about the cost of your business? Whether you’re running a small business or big, it’s important to keep an eye on the cost occurring within your business. That’s where CA comes into being. So in this guide, we’ll explore:
- – What cost accounting is
- – Types of cost accounting
- – Objective of cost accounting
So without much ado, let’s get started from scratch.
What is cost accounting (CA)?
In layman’s terms, cost accounting is the procedure of recording, analyzing and reporting all of your company’s cost pertaining to the production of a product. Moreover, cost accounting is helpful as it can identify where a company is spending its money and how much is the earning. With CA, company’s management can make a better financial decision and budget accurately.
Let’s dig deeper into CA below.
Different types of cost accounting
To know more about CA, you have to learn about types of CA. Have a look at the list given below.
1. Standard cost accounting
The oldest method of accounting is standard CA. This method is basically popular in manufacturing industry where manufacturers assign expected or standard cost. The method may be effective in saving time when it comes to budgeting. Today, businesses will have to pay the actual costs ultimately.
2. Project Accounting
Project accounting is all about cost related to an individual project. This type of accounting runs during a project’s execution. The project accounting reports include all your revenue, assets, costs, and liabilities associated with each projects.
3. Environmental Accounting
What this accounting refers to? Environmental accounting refers to the impact cost of a company’s product on the environment. Costs included in environmental accounting are:
- – Waste management cost
- – Clean-up cost
- – Pollution prevention technology
- – Prevention technologies
- – Penalties, fines, and taxes
Through environmental accounting, accounting firm can make a good decision in the future related to the cost involved in the business.
4. Activity-based Accounting
Also known as ABC accounting. The purpose of this method is to keep all accounting activities in consideration, activities which are required to manufacture a product, and greatly assign value to them. Let me tell you that ABC is a popular method in accounting field. This method helps you in determining whether the products are profitable or not, whether the product price is too high, and much more.
Now move on to know the object of CA.
What’s the main purpose of cost accounting?
Let’s understand the purpose of CA with given points:
Prepare a budget of your company
The first purpose of cost accounting is preparation of company’s budget. With CA, you can make a better budget plan for the future. An accountant involved in the company will be aware of businesses’ fixed assets. Having proper knowledge about company’s finance will help maximize the company’s help.
Company becomes more efficient
Every accounting firm wants to be efficient in their finances, right. With full efficiency, a company will discover that they don’t need ten-hour shift on a particular day. So you no need to hire number of employees to work in the company.
More profit you get
Do you want to earn high profit to your company? If yes, CA will help you achieve that. The more proficient you’ll be in your work, the more output you will produce. The more output you have, the more profit you can expect to get. The accounting firm rendering accounting services in New York also helps clients get more profit.
Help with internal cost
If you’re struggling to manage the internal cost of your company then CA is the great way you can handle the cost. With this method, you’re able to identify inefficiencies and apply the relevant improvements that are important to control cost.
The bottom line
So guys now that you have read about cost accounting, types of it, and objectives, I hope you have better idea about how to deal with your company’s cash. Isn’t it? You can say that CA is the best method of managing your company’s recurring cash. This way you get a complete picture of your company about the product related cost.
In case, you got any query or question to ask, get in touch with us. We’re here to help.