Thursday, March 5, 2009

Why Is Cost Accounting So Important?

There is more to accounting than accounting. Cost accounting is something a lot of business owners rarely think about.

I believe that if more companies had better cost accounting we wouldn’t have the issues we have in the downturn in the economy today. Businesses that understand cost accounting do well in these economic times and are more profitable than their competitors. Too often companies don’t realize they have a problem until it is too late to do something about it.

Cost accounting is a specialized branch of accounting, which involves classifications, accumulation, assignment and control of costs.

The use of cost accounting concepts and practices is required for a company to be successful. Cost accounting helps managers make better decisions by providing key information for planning and controlling. Cost accounting assists with measuring performance, determining costs & prices for goods or services, reducing costs, managing costs, and analyzing the benefits of an activity or process.

Companies need to measure their costs and then understand the behaviour of those costs over varying conditions such as changes in the volume of goods or services produced. Once this has been done, the costs can be assigned to the items produced or services provided and the profitability of each can be determined.

Ensure your company survives, and thrives, now by improving your understanding of your costs.

“If you can measure it, you can improve it.”

Tracy Wright,CMA
Tel: 250-470-8421

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