Cost accounting is a wide subject in which various methods are used according to the nature of the business and transactions. It is necessary to follow a proper accounting system to determine operations costs and actual cost of manufacturing the products. By employing the accounting system, decision makers would be in a good situation to make informed decisions to improve the overall performance of the entity.
Cost Accounting Systems
There are various methods of cost accounting systems used all over the world in manufacturing concerns. Some of them are as under:
Job Order Costing
This cost accounting system is employed where jobs or contracts can be kept separate from each other in the manufacturing process. This is quite common in industries such as film studios, printers, contractors and shipbuilders etc.
Batch Costing
This method is used where jobs or order are grouped in batches and then processed at the same time. Under this, batches are costed separately and then using this data, unit cost is determined for costing and decision making.
Process Costing
When a product is manufactured by processing through more than one process, then it is accounted for using the process costing method. It is not an easy method and within this we use various methods such as FIFO, LIFO and Weighted Average to cost the products.