by Michael222

Created on: December 23, 2007

Cost accounting is also referred to as managerial accounting.

The information gathered, organized,and presented by cost accounting professionals is intended for management within an organization.Cost accounting information is intended for internal use and are not constrained by GAAP(Generally Accepted Accounting Principles).

This is different from the goals of financial accounting which are to provide financial information to stakeholders outside of an organization. These stakeholders include:

Shareholders
Creditors
Government agencies

Managers in an organization need detailed information about the company's performance so they can make decisions to move the company forward...profitably.

Cost accountants perform calculations on raw data which will yield information about:

Gross profit
Net profit
Inventory turnover
Sales
Expenses
Cash flow
Budgets
Profit planning
Inventory control

Cost accountants report to decision makers within a company who Plan, Direct, Motivate, Control, and Evaluate their employees' performance.

These decision makers rely on cost accountants to supply them with timely, relevant, accurate financial data on the company's performance in key areas. This allows for future planning, and for strategic initiatives to be implemented to increase growth, productivity, and revenue.

Cost accountants also perform key work when it comes to the manufacturing process. They calculate what the costs are to produce a product. They take into consideration Manufacturing Costs or Product Costs, which are;
Direct Materials - materials that can be physically and easily traced to a product. An example of this would be cotton for a sweatshirt.

Direct Labor: labor that can be physically and easily traced to a product. An example would be a lathe operator who makes the wooden legs for a coffee table.

Manufacturing Overhead: These are costs that are incurred aside from Direct Materials and Direct Labor. These include: indirect materials, indirect labor, factory utilities, and depreciation on factory buildings and equipment.

Cost accounting supplies the information which is the heart of wise decision making by internal management of a corporation.

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