Cost and Management Accounting: Improving Cost and Cost Control

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Recommended: Importance of having a costing system

Cost and management accounting is an integral element in preparation of an entity’s financial reports. Cost accounting consists of various branches, including; job and process costing, absorption costing, traditional costing and activity based costing. An efficient costing system allows managers and other users of financial reports to make decisions to better the company, in reducing and stream-lining costs, to improve overall profits. The way in which managers achieve this can be a rigorous and time consuming task, however, if a costing system can be perfected, productivity and general cost reduction can be achieved and an overall more efficient operation of the business will ensue. This essay will critically discuss factors in which a business consider in deciding on a costing system to implement and operate when establishing a costing system. A costing system, by definition: “Costing system is that system in which we calculate different costs with different methods and also monitor cost for reducing wastage and misuse of resources.” (SVtuition.org, 2014) A costing system is made up of different elements which best suits a company’s operations. They have many elements that can be meshed into one system, and go hand in hand with one another. These methods include; Job costing, Process Costing, Absorption costing, Traditional costing and Activity based Costing Costing systems are relevant and useful in practices today because they provide a more efficient way in which managers and CEO’s monitor and influence costs and cash flows of a business. Costing systems therefore, sometimes need to be specialised for various business sectors. This is because different businesses operate in different ways, for example, a clot... ... middle of paper ... ...pproach. Journal Of Corporate Accounting & Finance, 23(3), 43--51. Horngren, C., Datar, S., & Rajan, M. (2012). Cost Accounting (14th ed., pp. 324 - 331). England: Pearson. Innes J, and Norris, G (1997), The use of activity-based information: a managerial perspective, CIMA. Innes J and Mitchell, F (1998), A practical guide to activity based costing, Kogan Page/CIMA. Managerial Accounting 6e. (n.d.). Retrieved from cambridgepub: http://www.cambridgepub.com/managerialaccounting_6e/MA_6e_CH02_Website.pdf wiseGEEK,. (2014). What Are the Different Management Accounting Tools?. Retrieved 2 May 2014, from http://www.wisegeek.com/what-are-the-different-management-accounting-tools.htm Vitez, O. (2013). What Are the Advantages & Disadvantages of Process Costing? Retrieved from Chron: http://smallbusiness.chron.com/advantages-disadvantages-process-costing-4098.html

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