Quiz 1: Introduction to Cost Accounting

Business

Cost accounting is the element of financial management. All the costs that are recorded by the business organization in order to improve the organization's management, is known as cost accounting. The cost accounting helps the management to take the most appropriate course of action on the basis of cost efficiency. Use of cost accounting to create information for reporting: Reporting is the system of communication in the written form. It includes interpretations, recommendations and findings with the supporting evidence. So, interpretations, recommendations and findings are reported by using cost accounting. Use of cost accounting to create information for management: For management, cost accounting helps the management to take the most appropriate course of action on the basis of its cost efficiency and capability as it helps in estimating the costs of the product or services. The conflict between both of these is as follows: Sometimes even after reporting the generated information, the financial information user does nothing after having it, no decision is taken at that time. So there arise the conflict between these.

Cost accounting system refers to the framework which the firms use to eliminate the cost of their products. It is critical to estimate accurate cost of product for making the operations profitable. So, the Firm should know that which products would be profitable and which would not and it can be measured only when the firm has judged the correct cost of product, so for this purpose there is a need of good cost accounting system. Following things should be considered to design good accounting system: 1. There should be a good knowledge of organization's structures, procedures and of all cost information. 2. Selection of a suitable cost technique according to the requirement of company's business. 3. Plans need to be formulated. 4. Proper methodologies should be there to treat scraps and waste. 5. Budgetary control technique is needed to compare the actual performance with the budgeted information to have better control on costs.

Cost accounting is the element of financial management. All the costs that are recorded by the business organization in order to improve the organization's management, is known as cost accounting. The cost accounting helps the management to take the most appropriate course of action on the basis of cost efficiency. The Negotiators of managed care contracts have the task of developing proper budgets, identifying strategies and negotiating profitability. By using cost accounting methodologies, operational costs can be categorized. Also, methods of controlling cost and development and stipulation of complete financial information can be determined and are used for decision making at the moment of negotiating a managed care contract.