COST ACCOUNTING

Cost accounting is an essential part of every business. It helps to provide a better understanding of fixed and variable costs to a business. Cost accounting classifies and records these costs, which helps to measure the financial performance of the organization.  

Cost accounting is used internally by management in order to make fully informed business decisions.

Importance of cost Accounting:-

Profit analysis – Cost accounting analyze each cost of the business and it helps to check which cost is contributing to the profit-making aspect. So, you can make business strategies according to the costs of a business.

Better decision making – Cost accounting statements provide the information of previous year expenses so you can make financial decisions for the future based on that.

Cost control – Cost accounting allows businesses to control the cost of inventory, labor, and other costs. Cost accounting classifies expenses into a variable, fixed, controllable and uncontrollable to achieve cost control.

Identify the break-even point – Break-even points are used to measure total costs. The break-even point analysis process helps to analyze the total costs that are associated with business operations.

Reduce overhead costs – Overhead costs are the indirect costs that occurred by a company such as advertising, insurance, power, and repair, etc. By separating direct and indirect costs you can eliminate the unnecessary wastage of overhead costs.