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Replacement costs

Replacement cost is the cost which would need to be paid to buy the asset today. It is used mainly during asset replacement decisions.

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

Life cycle costing

Life cycle costing attributes costs to the product/service over the life of the product/service and not over a single accounting period as most of other costing methods. It thus provides valuable information about product´s profitability over its entire life.   Stages of product´

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

Financial accounting

The purpose of financial accounting is to present true and fair information about financial position, financial performance and cash-flow of the entity for the external stakeholders such as shareholders, investors, creditors or government. Financial accounting looks mainly into the history and is (m

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

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

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