Introduction to Cost Accounting
Introduction
Internal users: are those people who work in the company and who have access to financial information in a varied way;that is, information according to your particular needs. External users: they are related to the company from outside and are provided with historical information;That is, when things have already happened and, in some cases, they also receive projected financial information.
Developing
Internal users
Shareholders: Know and evaluate the risk and return that your investment will have. Administration: Have reports that are used in planning, control and decision making to lead the organization to the achievement of the established objectives. Employees: Know the utility generated by the company and the participation they have in that usefulness, as well as the stability and expectations of development offered by the organization.
External users
Government authorities: to raise the taxes generated by the company, as well as obtain the statistical information necessary to guide the macroeconomic policies of the country.
Credit institutions: Determine if the credits requested by the company are proportional to their needs and level of indebtedness;know the ability to pay and know if they will be possible to apply credit and debt service in a timely manner;In addition, know the financial position of the company during the validity of the credit.
Suppliers: know the company’s ability to pay timely.
Customers: Evaluate the continuity of the company’s operation and guarantee the supply of products or services.
General public: study and evaluate the convenience of investing in the company.
What do you understand by financial accounting?
Information system of a company oriented towards the development of external reports that gives importance to historical aspects and considers financial information standards.
What do you understand by administrative accounting?
Information system of a company oriented towards the development of internal use reports that facilitate the functions of planning, control and decision -making of the administration.
Explain the functions of a commercial company.
Its main economic function is to act as an intermediary;that is, buy articles elaborated and then resell them, basically under the same conditions.
Explain the functions of a transformation company.
It is dedicated to the acquisition of raw materials to transform them physically and/or chemically and offer a product, to consumers, different from the product it acquired.
What do you understand by cost accounting?
It is an information system used to predetermine, register, accumulate, control, analyze, direct, interpret and inform everything related to the costs of production, distribution, sale, administration and financing.
Mention five cost accounting objectives.
- Contribute to strengthen the coordination and support mechanisms between all areas (purchases, production, human resources, finance, distribution, sales, etc.), To achieve the company’s objectives.
- Determine unit costs to establish strategies that become sustainable competitive advantages and for the purpose of evaluating production inventories in process and finished items.
- Generate information that allows the different levels of management better planning, evaluation and control of its operations.
- Contribute to improving the operational and financial results of the company, promoting entry to continuous improvement processes.
- Contribute to the preparation of budgets, in the planning of profits and in the choice of alternatives, providing timely, and even anticipated information, of the costs of production, distribution, sale, administration and financing.
What do you understand by cost?
Monetary value of the resources that are delivered or promised to deliver in exchange for goods or services that are acquired. It can also be considered as sacrifice or what is renounced to obtain something in return.
What do you understand by product costs or inventory costs?
Are the costs related to the production function;that is, direct raw material, direct labor and indirect positions. These costs are incorporated into the inventories of raw materials, production in process and finished items, and are reflected as circulating assets within the general balance. Total product costs are taken to the results status when, and as elaborated products are sold, affecting the cost line of the items sold.
What do you understand by period or non -inventable costs?
These are the costs that are identified with time intervals and not with the products made. They are related to the sales and administration functions of the company. These costs are not incorporated into inventories: they are taken to the income statement through the sales line of sale, administration and financial expenses, in the period in which they are carried out.
What do you understand by capitalizable costs?
They are those that are capitalized as fixed assets or deferred charges and then depreciate or amortized as they are used or expired: they give rise to inventory charges (costs) or the period (expenses).
Explain the fundamental difference between the cost of cost and spending.
In general terms, cost and expense are the same;although some specific differences between them are:
- The function to which they are assigned: the costs are related to the production function, while the expenses are related to the sales, administration and financing functions.
- ACCOUNTING TREATMENT: Costs are incorporated into inventories of raw materials, production in process and finished items and are reflected as circulating assets within the balance sheet;Production costs are carried out to the state statement mediated and gradually;that is, when, and as, the elaborated products are sold, so they affect the line of the articles sold.
Explain how costs are classified according to the function they fulfill.
The function incurred:
- Production costs (costs): They are generated in the process of transforming raw materials into elaborate products. There are three elements that make up the cost of production: direct raw material, direct labor and indirect positions.
- Sales costs (expenses): They are made in the area that is responsible for marketing finished products. For example: salaries and benefits of the employees of the sales department, commissions to sellers, advertising, etc.
- Administration costs (expenses): originate in the administrative area;that is, those related to the management and management of the general operations of the company. For example: salaries and benefits of the general director, of treasury staff, accounting, etc.
- Financial Costs (Expenses): They originate for obtaining others that the company needs for its development
Explain how costs are classified according to your identification.
- Direct costs: those that can be identified or quantified fully with finished products or specific areas.
- Indirect costs: are those that cannot be fully identified or quantified with finished products or specific areas.
Explain how costs are classified according to the period in which they are taken to the results status.
- Product costs or inventory costs (costs): they are related to the production function. These costs are incorporated into the inventories of: raw materials, production in process and finished items and are reflected as circulating assets within the general balance. Product costs are taken to the results status when, and as elaborated products are sold, so they affect the cost of the items sold.
- Period costs or non -inventory costs (expenses): They are identified with time intervals and not with the products made, they are related to the sales and administration functions: they are taken to the results status in the period in which they are incurred.
Explain how costs are classified according to the behavior with respect to the volume of production or sale of finished items.
- Fixed costs: are those costs that remain constant in their magnitude within a given period, regardless of the changes registered in the volume of operations carried out.
- Variable costs: are those costs whose magnitude changes directly to the volume of the operations carried out.
- Semi -infex costs, semi -perable or mixed: are those that have both fixed and variable elements.
Explain how costs are classified according to the time they are determined.
- Historical costs: They are determined after the conclusion of the cost period.
- Predetermined costs: They are determined prior to the cost period or during the course of the same.
Bibliography
Garcia, J. (2014). Cost accounting. (ed. 4.ª) Mexico.
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