Definition of Cost Accounting, Function and Classification

Cost Accounting is a process of financial recording in which classification and summarization occur at a cost of production, sale of products or services using a certain method complete with an explanation.

This cost accounting is needed for accountability to external parties of the company such as investors or creditors, as well as internal parties (management) of the company itself. Cost accounting is needed by every company, because the historical data presented in the recording will be very important to be used by management in making decisions or policies in the future.

Definition of Cost Accounting

Bastian and Nurlela (2006)
  Cost accounting is the field of accounting science that focuses on learning about ways or methods for recording, measuring, and reporting information about the costs used during the production process.

Kholmi and Yuninsih (2009)
  Cost accounting is the process of tracking, recording, allocating, and reporting accompanied by an analysis of various costs associated with the production activities of a company in producing goods or services.

Datar, Foster, and Horngren (2005)
  Cost accounting is a field of study that studies the provision of information needed by a financial accounting and management of a company. The presence of cost accounting can measure and report information both related to finance and non-finance, which is related to the costs obtained and the utilization of resources in an organization.

Rayburn (1999) 
  Cost accounting is the thing that has the purpose of identifying, measuring, reporting, and analyzing all elements of costs, either direct or indirect costs related to the production process and marketing of goods and services produced in a company.

Cost Accounting Function

1. Determination of Cost of Goods
  The first cost accounting function is to determine the determination of the cost of a product or service produced by the company. Do not let the price offered is too high or too low by consumers. Determination of cost of goods is obtained by recording, classifying, monitoring, and summarizing all components of costs related to the production process from historical data that is used as a reference for management in determining the cost of production.

2. Cost Planning & Control
  The basis used in estimating costs is historical data by considering other factors that are predicted to affect costs. In planning and controlling costs, the management will monitor whether there are irregularities (there is a difference between the actual costs and cost planning). If there is, the management will analyze the causes of the difference and consider corrective actions that need to be done as a form of control.

Load Classification

Cost classification is a process of grouping costs based on the objectives of the cost information presented. To make it easier to record costs and compile financial statements, as well as provide accurate information to management, the cost components are grouped into several accounts with the following classification.

Based on the Main Functions of the Company's Activities

a. Production Cost
  Accumulation of all costs required in the production process in order to produce a product or item. These costs include raw material costs, labor costs, operational costs of goods or factories, and so forth.

b. Marketing Expenses
  Costs that must be incurred to ensure all products are purchased by consumers. Examples of marketing costs are the promotion and advertising costs of the company.

c. Administrative & General Fees
(General Administration Expenses)
  Costs used to coordinate product production and marketing activities, such as employee salary costs, office overhead, and other related costs.

Based on Activity or Production Volume

a. Variable Cost
  The cost component changes according to the production volume produced. The greater the volume of sales, the greater the costs that must be incurred. Examples of raw material costs and labor costs in making shoes. If the shoe leather material is IDR 2,000 per pair and the employee cost is IDR 500 per shoe, then the production cost of 1 pair of shoes is IDR 2,500.

If 1 day = 10 shoes x 2500 = 25,000
If one day = 20 shoes x 2500 = 50,000

Non-fixed costs are called variable costs or variable costs.

b. Fixed Cost
  Costs are always constant and are not affected by production volume. Fixed costs have two characteristics, namely costs do not change or are not affected by certain periods or activities. And the cost per unit is inversely proportional to changes in volume. If the volume is low, fixed costs or fixed costs are high, on the contrary, at high volumes, the fixed cost per unit is low. For example, the monthly salary of a computer shop employee is Rp. 800,000. If in one month the store only serves 10x purchases or 30x, the employee's salary is still Rp.800,000. The fixed salary is called a fixed cost or a fixed cost.

Based on the Financed Objects

a. Direct Cost
  Costs that can be identified are directly related to the production of objects. Examples include direct labor costs and raw material costs.

b. Indirect Cost
  Costs that cannot be identified directly with the overall production process. Examples of electricity costs, machine depreciation, foreman's wages, and factory administration costs.

Based on the Accounting Period Imposition


a. Capital Expenditure (Capital Expenditure)
  Costs incurred in order to obtain fixed assets, increase operational efficiency and productive capacity of fixed assets, and extend the useful life of fixed assets. For example a factory machine that has depreciation for 5 years.

b. Revenue Expenditure
  Costs that will only benefit in the current period, so that the costs incurred will not be capitalized as fixed assets in the balance sheet, but will be directly charged as an expense in the current period's income statement where the costs incurred (incurred).

  Cost accounting is an important part of calculating production financing which will have an impact on the continuity of production and the determination of the future of your business strategy. To produce a record of cost accounting, of course a company must have a record of each transaction properly and correctly in order to avoid the wrong calculation in the preparation of financial statements.

  An online accounting software journal, is one of the trusted accounting solutions for your business. With a Journal, you can get the convenience of recording for the cost of accounting anytime and anywhere. Not only transaction recording, the Journal also provides automatic invoicing, tracking product availability, and asset management that will help develop the asset value of your future bianist. To find out more information about the Journal, you can get it. Daunpendidikan.com

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