Articles , Page 14


Cost accounting

Cost accounting is a set of management accounting methods, techniques and procedures used mainly to determine actual or planned costs of cost objects (cost center, product, cost unit, department, process, activity). Cost accounting is not an exact discipline.  It involves a set of well tried-o

Joint and by product costing

Joint and by product costing are specific costing methods that are used for the purpose of assigning costs to separate products in cases where two or more different products are manufactured together in the same production process – so called joint products OR main and by product.  &nbs

Cost measurement basis in cost accounting

Pure historical costs – only actual costs are used for all types of costs. But even if historical costs are used, a number of allocations are usually necessary (e.g. overheads) to obtain unit cost. (3) Normal historical costs – historical (actual) costs are used for direct material

Absorption costing

Absorption costing is a type costing method or rather the approach to costing. It is sometimes called as full costing method as it values the product (or jobs, batches, processes etc.) by direct costs and allocated, apportioned and absorbed share of production indirect costs (production overheads)

Contract costing

Contract costing is a type of costing method that calculates the costs for separate contracts. Contracts are “bigger jobs”, typically very expensive that take a long time. It is therefore very similar to job costing method which calculates costs for separate jobs. The difference is tha

Activity based costing (ABC)

Activity based costing (ABC) is costing method, under which all costs are allocated to company activities according to what are the drivers of the activities. Costs are then allocated to products based on product´s consumption of these activities. ABC was developed to overcome the disadvanta

Reporting the costs of inventory in the financial statements

Costs are usually debited as an expense in the entity´s profit and loss statement. But it is not often the case for costs incurred in the inventory production process. Direct costs, usually together with allocated production indirect costs (production overheads), form the value of various form

Throughput costing

Throughput costing is a type of costing method under which only direct material costs are included to the value of the product (or job, contract, batch, process, etc.). Other costs are expensed when incurred. It is not acceptable for inventory valuation either under IAS 2 or US GAAP but it may be

Costing methods and their types

The purpose of costing methods is to determine the cost of a so-called cost object. This is most often cost unit, i.e. usually a single piece of product. In particular, the costing is used to value inventory, for example for the purpose of their proper accounting, product valuation, management of in

Job costing

Job costing is a type of costing method that calculates the costs for separate and unique jobs - often one-off product or service. In other words, each work order is costed separately. Example of a job: development or implementation of a software or tailor-made furniture   Timesheets are of

Costing methods according to the cost types included

Costing methods differ also in the cost types that will be included in the value of inventory (costs of goods sold) and which shall be booked directly to the statement of profit and loss as period costs.   Cost accounting methods include: Full costing or full production costing methods, e

Differences between Absorption costing, Activity Based Costing, Marginal costing and Througput costing

The basic difference between these costing approaches is what costs are assigned to the product. However, Absorption costing method and Activity Based Costing use different approach, but more about it can be found  in separate articles.   Under Throughput costing, only direct material co

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