Cost Accounting

A branch of accounting that observes and calculates the actual costs of a company's operations. Internal managers, rather than auditors, use cost accounting most of the time to identify aspects of their company where costs can be cut. For example, a manager may enlist a cost accountant to determine the most expensive aspects of his/her business that is, where the money goes. The accountant may make a detailed report so that the manager may make decisions based upon it. Because cost accounting is primarily internal, it need not conform to the Generally Accepted Accounting Principles. It is also called managerial or management accounting. See also: Assurance, Activity-based costing.

Fig. 53 Management accounting. Trading results: Y Company Plc for year ending 20xx.

management accounting

any accounting activities geared to the preparation of information for managers to help them plan and control a company's operations. Management accounts generally provide more detailed information than financial accounts; for example, breaking down revenues and costs between different products, factories or departments to provide comparative data and to help reveal profitable and unprofitable activities. Management accounts also tend to provide information about performance more frequently than financial accounts, with monthly or even weekly management accounts rather than annual financial accounts, to give managers prompt feedback and to enable them to act quickly to check inefficiencies. Management accounts are geared to estimates of future costs and revenues rather than simply reporting past revenues and costs as financial accounts do, thereby ‘providing valuable management information for preparing accurate estimates and tenders and for use in negotiating price changes.

Fig. 53 shows how more detailed analysis of revenues and costs can provide more useful information than total information as reported in the PROFIT-AND-LOSS ACCOUNT. Compare FINANCIAL ACCOUNTING. See also BUDGETING.

management accounting

any accounting activities geared to the preparation of information for managers to help them plan and control a company's operations. Management accounts generally provide more detailed information than financial accounts, for example, breaking down revenues and costs between different products, or factories or departments to provide comparative data and to help reveal profitable and unprofitable activities. Management accounts also tend to provide information about performance more frequently than financial accounts, with monthly or even weekly management accounts rather than annual accounts, to give managers prompt feedback and to enable them to act quickly to check inefficiencies. Compare FINANCIAL ACCOUNTING.