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Cost Accounting Importance

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Relevance and importance of cost accounting
Management accounting, also known as managerial accounting, is disparate from financial accounting. Financial accounting produces reports for a firm’s external stakeholders meanwhile management accounting produces reports for company’s internal stakeholders. Management accounting is essential in providing statistical data in a timely manner for managers to make managerial decisions. Moreover, cost accounting is one of the many approaches in management accounting. Cost accounting analyses the costs of products manufactured or sold by a company. There are many benefits of cost accounting that can aid managers in an organization. Based on the research we carried out on this issue, there are several importance …show more content…

According to the statement, it is clear-cut that costing helps management in planning and providing adequate information that enables the evaluation of the past and future activities. Cost analysis is imperative to classify costs into controllable or uncontrollable, relevant or irreverent, profitable or unprofitable and etc. By analysing these costs, comparisons can be made. Cost data can be compared to disparate periods and volumes of production in order to assist management in forming future lines of action. Management will be able to distinguish between profitable and non-profitable activities. To maximize profits, management will opt to concentrate on profitable operations and obliterate non-profitable ones. Channelling production in the right line is a good example in the decision-making process of a firm. Furthermore, costing can be useful in periods of recession and competition for decision-making. During trade downturns, businesses cannot afford to have leakages which pass unchecked. Management must be aware of where economies may be solicited, waste annihilated and efficiency ameliorated. The company has to establish many endeavors to sustain its survival. In such cases, management should be well-informed of their actual product costs in order to generate any scheme of reducing prices or giving tenders. This shows that the costing system facilitates the process of decision-making within an organization. Ergo, it is blatantly obvious that cost accounting is significant in every company, especially in the decision-making

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