January 10th, 2018
Cost Accounting Aspects and Their Role in the Success of a Firm
Assessment of the costs associated with doing business is critical to a firm’s success. Such an assessment, for instance, provides the management with credible information on the profitability of operations, divisions and departments. With this information the management is able to identify the core areas that need more focus in terms of resource allocation and/ or operations control. But, cost accounting is not only involved in ascertaining historical costs; it also provides important procedures for developing well laid out budgets. The importance of having sound budgets/ plans in any organization cannot be underemphasized, one being that these serve as important control systems to govern a firm’s actual expenditure. This paper aims to assess the importance of cost accounting in ensuring a firms success. The cost accounting methods and ways in which these are used to reinforce the importance of the process to a firm are discussed. Further the mode via which an operating budget impacts discipline in an entity’s management, the elements of a budget and its effective interpretation are considered. Finally the paper highlights the concept of variance analysis and why analyzing the differences between budgeted and actual performance is important to a firm’s success.