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Role of Cost Accounting Essay

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The Role of Cost Accounting
Karissa Johnson
ACC206: Principles of Accounting II
Instructor: Brent Beyer
June 12, 2012

The Role of Cost Accounting
Cost accounting is very valuable to any organization; it is considered to be a method for making sure the costs of services or products are on the basis of past data.   Accounting systems affect the actions and authority and have consequences across countries, and even departments.   Cost accounting is the part of the accounting process that reports the financial and income situation in accordance to the accounting rules and focuses on accounting rules.   Cost accounting principles can be used to visualize changes in events.
“Reliable information on the cost of programs and activities is crucial for the effective management of a business entity’s operations.   Cost accounting is especially important for fulfilling the objective of assessing operational performance.   The objective is to improve the efficiency and effectiveness of operations by furnishing program managers and others with timely and relevant cost-based performance information to allow for continuous improvement in delivering outputs and outcomes to stakeholders” (Devilliers, 2007).
“Cost accounting essentially entails five elements which compromise of an input measurement basis, and inventory evaluation method, cost accumulation method, cost flow assumption, and recording interval capability” (Wiersema, 2010).   Cost accounting can help management accomplish: controlling inventory cost, set up a cost tracking method, formulating and implementing plans and budgets, making careful decisions that affect both short- and long-term revenues and expenses, and pricing products and services.  
“Direct costs are traced in between the throughput and activity based methods.   Such inventory valuation methods are quite significant since they influence the way in which net income is ascertained” (Bagherpour, 2010).   For a company to heighten their combative...

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