Basic Concepts of Cost Accounting

Cost accounting is the process of recording, classifying, summary and presenting  cost of manufacture and sale of products or services in a way - in a certain way and interpretation to it. Object cost is the cost accounting activities.

Cost accounting is used in all the organizations of manufacturing companies (manufacturing), trade, and services. For example: government, universities and businesses both for-profit or not. There are four usage information of Cost Accounting:

1. Job evaluation

2. Decision making

3. Financial reporting

4. Tax Reporting

 If the cost is used in organizations by managers to evaluate the performance of the operation or personnel or as a basis for decision making, we say the cost - the cost is used for the purpose of management accounting.

Meanwhile, if the cost is used by outsiders, such as shareholders / creditors to evaluate the performance of top management and decision making of our organization said the cost was used for the purposes of Financial Accounting.

Cost is the sacrifice of economic resources that have a specific goal, has been, is and will be carried out or calculated in units of money.

Cost consists of Outlay Cost and Opportunity  Cost:

Outlay cost is all costs incurred while the Opportunity Cost is the cost incurred due to reach a particular occasion.

Profit also consists of Operating Income and Net Income.

Operating profit is the profit derived from the difference of positive operating income to operating expenses. Operating profit is used by internal parties. While Net Income is operating income minus income tax, profit is used by external parties.