• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Cost Accounting: Its role and ethical considerations

Extracts from this document...


Cost Accounting: Its role and ethical consideration Introduction: Accounting is the process of identifying, measuring, and communicating economic information about an entity for the purpose of making decisions and informed judgements. The major areas of within the accounting are: Financial Accounting, Managerial Accounting/Cost Accounting and Auditing- Public Accounting Managerial accounting is concerned with the use of economic and financial information to plan and control the activities of an entity and to support the management in planning and decision-making process. Cost accounting is the subset of managerial accounting and it helps management in determination and accumulation of product, process or service cost. Role of Cost Accounting: Increased competition and uncertain business conditions have put significant pressure on corporate management to make informed business decisions and maximize their company's financial performance. In response to this pressure, a range of management accounting tools and techniques has emerged. One of the most important tools that a management can use is - Cost Accounting. ...read more.


standards and a commitment to the proper reporting and disclosure of financial information needs to be constantly reinforced within the area of accounting. Absorption and Variable Costing: Absorption Costing: All costs (fixed and variable) of production are product costs. Which means under absorption costing, both variable and fixed manufacturing costs are included as a part of the cost of the product manufactured. Variable Costing: Only those costs of production that vary directly with activity (variable costs) are treated as product costs. Under variable costing, only the variable manufacturing costs are included as a part of the cost of the product manufactured. The fixed manufacturing costs are treated as an expense of the period in which they are incurred. Cost classification under absorption and variable costing: Absorption Costing Variable Costing Product Cost: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Product Cost: Direct materials Direct labor Variable manufacturing overhead Period Costs Selling and administrative costs Period Costs Fixed manufacturing overhead Selling and administrative costs The basic difference between absorption and variable costing relates to the handling of fixed manufacturing overhead. ...read more.


Supporters of variable costing believe that fixed manufacturing costs are not really the cost of any particular unit of product. If a unit is made or not, the total fixed manufacturing costs will be exactly the same. These fixed costs are incurred to have the capacity to make products during a particular period and should be charged against that period as period costs according to the matching principle. Conclusion: Cost accounting is an important tool that can help management in making informed decision. Though it is not legally required but still it is necessary to run an entity effectively. Cost accounting is turned toward the future. There are different methods of costing in Cost Accounting: Absorption costing and Variable costing. Both have some merits over the other. An entity can use both of them for different uses. Absorption costing can be used for external reporting, managers need to review the effect of their decision on financial reporting to outsiders whereas Variable costing can be used by managers to review the effect of management decisions on production, costs and profits. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. Unit 5 Introduction to Accounting

    For this reason, it is also known as the EBIT (earnings before interest and taxes) margin. * Net profit margin - this is a much narrower measure of profits, as it takes all costs into account, not just direct ones.

  2. What does Finance involve.

    kept a bought of �200 which I can use if there is any other equipments I need to buy urgently. Now I will need to add up my general costs form my other parts of the coursework such as; marketing, advertising, job adverting, uniform etc.

  1. A Role of Ethics and Social Responsibilities in Management

    ( A. Alhemoud). How, then, a company can ensure that its code of ethics is both followed and enforced ? " . ..Defense firm such as General Dynamics and TRW, and an information company, Dun & Broadstreet, have appointed internal ethics officers or ombudsmen.

  2. Exploring business purposes

    Private businesses need to make a profit to survive so will only sell goods at a price that enables them to do so. * Public services are provided locally and nationally by the government and local authorities, for example education, emergency services, housing, law and order, defence and military activity, social services, local planning, recreational facilities and so on.

  1. International Accounting Standarts

    3.1 Active Side 3.1.1. Assets HGB: The balance consists out of the Activa (Assets) and Passiva (Liabilities) side. All structural prescriptions are listed in HGB �266 (2) and (3) in detail, therefore here we will give the basic overall structure only briefly.

  2. Harmonisation of accounting standards in Europe

    The Directive cover both public and private companies in all EU countries. In 1978, the EC implemented the 4th Directive on the Format and Rules of Accounting, which harmonised the general layout and content of company financial statements. Although a limited number of national options were permitted, companies registered in

  1. The Purpose of Keeping Accurate Accounts

    Computer virus: program which introduced to computer systems can go undetected and gradually destroy all the files maintained in the system. 4. Computer hackers: unauthorised people can gain access to a computer files and make amendments to those files.

  2. This report has been produced as evidence for Unit 9 - 'Financial Services' - ...

    The FTSE 100 Index (the listing of the 100 largest British companies) was launched in January 1984 at a base of 1,000 and has increased to a level which had been in excess of 6,000 - until recent declines pegged it back closer to 4,000.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work