Part 1 of a series on cost management leadership

If you think your business is a leader in cost management, please email us at and let us know the name of the business and why they are a cost management leader. We want to know what sets it apart.

From Wikipedia:

Cost accounting is a process of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.[1]

Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, information must be relevant for a particular environment. Cost accounting information is commonly used in financial accounting information, but first we are concentrating on its use by managers to make decisions.

Unlike the accounting systems that help in the preparation of financial reports periodically, the cost accounting systems and reports are not subject to rules and standards like the Generally Accepted Accounting Principles. As a result, there is wide variety in the cost accounting systems of the different companies and sometimes even in different parts of the same company or organization.

Objectives of Cost Accounting:

What Do Cost Accountants Really Do?

1. Maintain proper inventory valuation – lead cycle counts and physical inventories; calculate reserves and lead efforts to reduce excess, obsolete, and slow-moving; fix any type of transaction or receipt errors.
2. In a standard cost system, set standards and perform variance analysis.
3. Perform any type of analysis required by the business, often this involves reconciling sales and COGS or performing differential analysis.
4. Forensic accounting, tracing through the ERP system to perform causal analysis.
5. The ‘expert’ of the ERP system.

Next article in the series

TOTAL COST MANAGEMENT: Management Accounting
Part 2 of a series on becoming a cost management leader


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