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4 Advantages of Cost Accounting and Their Explanations
Definition of accounting is one of the types of information that can be used for the purposes of costs, recording, and analysis of costs associated with an organization / company to produce goods or services. Costs are the time or resources needed to produce the currency that applies in the country.
The characteristic reads the cost for calculating costs in the form of goods and income. On the financial market, costs are calculated and can be adjusted to the process, batch of units or departments, client orders, project contracts, and product lines. Some types of tax payments are standard costs (standard costs), activity based costing and yield costs. Here are some additional cost accounting.
1. Become a Tool for Monitoring Management
Excess costs are a specific internal management tool for companies to cut transactions that generate technical costs. The processes used to produce, control, and price, and decisions, and decisions by management. Cost accounting can also help management to achieve competitiveness.
2. Means for Determining Cost of Goods
Cost accounting system is used to determine the cost of a product or service produced by the company. The price specified may not be too high or too low by consumers. Determination of the basic price is done by recording, classifying, monitoring, and summarizing all the cost components related to the production process from historical data that is used as a reference by the management in determining the cost of production.
3. Used for Planning and Expenditures Control
Determinants of cost estimation are historical data taking into account other factors that are predicted to affect costs. Planning and cost control will monitor the occurrence of irregularities (the difference between the actual costs and the cost planning). The management will analyze the causes of the difference and take corrective actions as a form of corporate control by considering elements of financial statements.
4. Used to Determine Components of Production Costs
The contemporary operational environment of the company emphasizes automation which results in a shift from intensive labor to intensive capital. The calculation of cost of goods-based product cost is also determined by cost accounting that provides accurate cost information about a cost object to support decision making. The fundamental change in contemporary cost accounting is to focus on activities or processes, not on production functions or units within the organization. Activities are determined by analyzing business processes or value chains. The activity-based calculation of cost of goods is done to produce products that require resources that generate costs.
After knowing about the advantages and scope of cost accounting, it will be easier for readers to understand the differences in expenses and costs in accounting. This type of accounting is very needed by the company because every day the company issues operational costs and other unexpected costs. The company must produce expenses in the form of costs to generate profitable income. Sacrifice must be made to get something in accordance with economic principles. The company must be able to spend as little as possible to generate revenue as much as possible so that it becomes the company's profit.
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