About Cost accounting

Cost accounting is the most important and toughest subjects in accounting.  That’s what a majority of accountants will tell you.  The reasons are quite obvious.  Cost Accounting is unique for general accounting and many of the terms of cost accounting are not used in management accounting or financial accounting. 

It’s a kind of accounting in which all costs that are incurred in carrying out an activity or a production is recorded.  The basic purpose of this is to define the actual cost that has been incurred in a business.  This will facilitate the top management to take a decision on the selling price of the product.  The selling price is arrived by summarizing the cost incurred at the input stage.  This helps a lot in determining where savings can be made so as to lower selling prices.

Lowering selling price will give an edge to the product to that of the competitor’s.  This part of accounting is the most important and toughest of all accounting practices.  Financial accounting and cost accounting is the opposite of each other.  While financial accounting measures economic performance by considering money, in cost accounting the economic factor of production would be money.