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Cost Accounting System – Developing Strategies to Analyze Cost Flow

The primary objective of any cost accounting system is to determine and analyze the various factors that influence the total price of a manufactured product or service. This system involves analysis, classification and interpretation of cost and the factors which affect it.

Cost Accounting SystemPHOTO BY FLICKR.COM/JOEBEONE/

Cost Accounting System - Basic Objectives of the Process

The functional relationship between management of the business for profit and growth and the venture’s expenditure is established through a cost accounting system. The first objective of the system is to determine the selling price of the product or service that is being generated by the business, by analyzing the various cost factors that are involved. After having determined the genesis of the costs this accounting system attempts to define means for the controlling the cost factors. The system through its analytical methods suggests means for the management to take decisions. It additionally helps in ascertaining the costing profit by considering the goals of the venture. The final aim of a cost accounting system is to facilitate the creation and maintenance of all financial documents and records of the business.

Fundamentals of Cost Accounting - Knowing the Scope

The knowledge of the fundamentals of cost accounting is essential for the decision making entities inside the organization to determine the exact expenditures being incurred by the set up. Cost book keeping and costing are the two preliminary steps related to the scope of the process aimed at accounting of the expenses involved. Ascertaining the cost of products, processes and services is also within the scope of costing process. The analysis of the costs and its comparison with the planned budget outlay is the most essential part of any cost accounting. Cost control and cost reports are the required final products that constitute the fundamentals of cost accounting.

Cost Accounting Software - Functions Required

Any professional cost accounting software must provide a basic set of functions which can be used to derive the desired information in easily interpretable manner. The foremost requirement is for the software to provide real time accounting which enables the managers to take decisions at the earliest. The software should have capabilities to account in multiple currencies, languages and different company formats. Handling real enquiries and browsing capability of all the collated data helps faster and effective decision making. User friendly features that provide simple reporting but powerful analysis are hallmarks of great software for accounting. Lastly this kind of software must essentially have standard integration features with other similar software and web services.

Written by Katherine Murphy

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