Introduction to Cost Accounting
Learning Objectives:
The main and primary objective of accounting is to provide financial
information about an economic entity to different types of users.
First, we have internal users โ managers for planning, controlling and decision-
making.
Then we have external users โ the ``government, those who provide funds, and
those who have various interests in the operations of the entity.
Cost Accounting โ is an expanded phase of general or financial accounting that
informs management promptly about the cost of rendering a particular service,
buying and selling a product, and producing a product. It is the field of accounting
that measures, records, and reports information about costs.
All types of business entities โ manufacturing, merchandising, and service
businesses โ require information systems that provide the necessary financial
data. Because of the nature of the manufacturing process, the information
systems of manufacturing entities must be designed to accumulate detailed cost
data relating to the production process.
Thus, it is common today for small, medium, and large manufacturing
companies to have structured cost accounting systems. These systems should
show what costs were incurred and where and how these costs were utilized.
Cost accounting today is recognized as being the essential to efficient
cooperation of business and industry.
Comparison of Financial, Managerial, and Cost accounting
There are two major areas of accounting โ (1) Financial accounting and (2)
Managerial accounting.
