{"id":248975,"date":"2023-04-04T10:54:00","date_gmt":"2023-04-04T08:54:00","guid":{"rendered":"https:\/\/www.altermes.fr\/what-is-cost-accounting\/"},"modified":"2023-12-14T15:29:22","modified_gmt":"2023-12-14T14:29:22","slug":"what-is-cost-accounting","status":"publish","type":"post","link":"https:\/\/www.altermes.fr\/en\/what-is-cost-accounting\/","title":{"rendered":"What is cost accounting?"},"content":{"rendered":"\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<p>Cost accounting provides objective accounting data on a company&#8217;s various expense and revenue items, enabling you to assess the financial performance of a project, a service, a product or even a country.  <\/p>\n\n<p>Analytical financial data then enables company management to make well-considered decisions (abandoning production of a product, renegotiating a project, closing a department, etc.).<\/p>\n\n<p>Cost accounting is therefore an indispensable tool for managers and entrepreneurs who want to optimize their company&#8217;s profitability.<\/p>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<figure class=\"wp-block-image aligncenter size-large is-resized\"><img decoding=\"async\" src=\"https:\/\/www.altermes.fr\/wp-content\/uploads\/2023\/07\/Comptabilite-analytique-2-1024x683.jpg\" alt=\"cost accounting\" class=\"wp-image-247460\" width=\"512\" height=\"342\"\/><\/figure>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<h2 class=\"wp-block-heading\">What&#8217;s the difference between general and cost accounting?<\/h2>\n\n<p>General and cost accounting are intimately linked, yet they do not have the same objective.<\/p>\n\n<h3 class=\"wp-block-heading\">General accounting: definition<\/h3>\n\n<p>General accounting is a <strong>legal obligation <\/strong>that involves recording, listing and classifying a company&#8217;s financial flows:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Cash inflows<\/li>\n\n\n\n<li>Cash outflows<\/li>\n\n\n\n<li>Preparation of annual financial statements<\/li>\n\n\n\n<li>Classification of different cash flows according to legal nomenclature.<\/li>\n<\/ul>\n\n<p>In France, general accounting is defined by the Plan Comptable G\u00e9n\u00e9ral (PCG), in accordance with the standards set out in the Code du Commerce.<\/p>\n\n<h3 class=\"wp-block-heading\">Cost accounting: definition<\/h3>\n\n<p>Although not mandatory, cost accounting is above all a <strong>tool for analyzing<\/strong> a company&#8217;s operations from an accounting and financial point of view.<\/p>\n\n<p>Much more detailed than general accounting, it enables you to study cost and revenue structures by department, project, position, country, etc.<\/p>\n\n<p>This can be used, for example, to identify the income and expenses associated with a building site for a construction company. This makes it possible to calculate very precisely the production and distribution costs associated with each product for a finished goods manufacturing company.<\/p>\n\n<p>The aim of cost accounting is therefore to help managers make informed decisions to optimize their company&#8217;s profitability.<\/p>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<h2 class=\"wp-block-heading\">Why implement cost accounting in your company?<\/h2>\n\n<p>The benefits of cost accounting for business are numerous, and its use is so widespread that it has become virtually mandatory for any company wishing to remain competitive.<\/p>\n\n<p>Cost accounting makes it possible to :<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Know the exact cost of a product or service, so you can set an appropriate purchase or sale price.<\/li>\n\n\n\n<li>Determine expenses and revenues for a specific item<\/li>\n\n\n\n<li>Analyze project profitability<\/li>\n\n\n\n<li>Examine the performance of each department<\/li>\n\n\n\n<li>Evaluate inventories and work-in-progress<\/li>\n<\/ul>\n\n<p>This budgetary control tool facilitates management and decision-making, by providing objective, concrete figures.<\/p>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<h2 class=\"wp-block-heading\">Cost accounting calculation methods<\/h2>\n\n<p>Cost accounting allows you to analyze profitability item by item. There are different methods for calculating costs:<\/p>\n\n<h3 class=\"wp-block-heading\">Full costing<\/h3>\n\n<p>This method distinguishes between direct and indirect expenses:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>The first are attributed directly to the cost of the product\/service<\/li>\n\n\n\n<li>The latter are broken down into several products or services, depending on the analysis center.<\/li>\n<\/ul>\n\n<p>To apply this costing method, expenses appearing in the general ledger must be classified between :<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Those that can be incorporated, which serve as the basis for calculating costs<\/li>\n\n\n\n<li>The so-called &#8220;non-incorporable&#8221; ones, mainly those that are exceptional or unrelated to the company&#8217;s activity, which are not taken into account.<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\">The partial cost method<\/h3>\n\n<p>This partial cost method takes into account only part of the overall cost of a product:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Variable costs vary according to activity or production.<\/li>\n\n\n\n<li>Specific fixed costs are those that are directly attributable to the product (e.g. a machine used solely for the production of a given product).<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\">The direct costing method<\/h3>\n\n<p>Direct costing is based on :<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Calculate the margin on variable costs for each product or service<\/li>\n\n\n\n<li>Breakdown of total fixed costs by margin<\/li>\n<\/ul>\n\n<p>This method is mainly applied to companies offering multiple products and services, or with several activities.<\/p>\n\n<h3 class=\"wp-block-heading\">Activity-based costing (ABC)<\/h3>\n\n<p>The ABC method (for &#8220;Activity Based Cost&#8221;) is based on the notion of value rather than cost: resources are consumed by activities, not products or services.<\/p>\n\n<p>This implies a breakdown by company activity rather than by product.<\/p>\n\n<p>Then, by determining the drivers and their consumption, we obtain a cost attributable to each activity.<\/p>\n\n<h3 class=\"wp-block-heading\">Standard costing<\/h3>\n\n<p>This method is based on pre-established costs. These estimates are used to draw up budget forecasts, which are then compared with actual expenses incurred.<\/p>\n\n<p>This method is frequently used in development projects.<\/p>\n\n<h3 class=\"wp-block-heading\">The target cost method<\/h3>\n\n<p>Often referred to as &#8220;target costing&#8221;, target costing is based on the opposite logic of traditional methods:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>The selling price is set by the market<\/li>\n\n\n\n<li>Margins are set by shareholders<\/li>\n\n\n\n<li>Cost is a variable to be adjusted<\/li>\n<\/ul>\n\n<p>This method, often used today, requires a global approach to the product development process, and an optimization approach at all levels of the company.<\/p>\n\n<figure class=\"wp-block-image aligncenter size-large is-resized\"><img decoding=\"async\" src=\"https:\/\/www.altermes.fr\/wp-content\/uploads\/2023\/07\/Analyse-de-couts-1024x683.jpg\" alt=\"\" class=\"wp-image-247462\" width=\"512\" height=\"342\"><\/figure>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<h2 class=\"wp-block-heading\">How do you reconcile general and cost accounting?<\/h2>\n\n<p>Cost accounting is based on general accounting data.<\/p>\n\n<p>It is absolutely essential to be able to reconcile the entries recorded in the general accounts with those appearing in the cost accounts.<\/p>\n\n<p>Numerous accounting management software tools (CEGID Loop and others) can be used to set up both compulsory general accounting and cost accounting tailored to your company&#8217;s needs. Next, you need to define one or more analytical axes and a cost\/income allocation key.<\/p>\n\n<p>The most advanced software also offers the possibility of integrating different costing methods, giving managers a global view of the company&#8217;s activity. It&#8217;s a valuable source of information, enabling you to make decisions with all the facts at hand.<\/p>\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n<figure class=\"wp-block-image aligncenter size-large\"><img decoding=\"async\" src=\"https:\/\/media.giphy.com\/media\/XqISUtXjwakn7yZnqv\/giphy.gif\" alt=\"\"><\/figure>\n<p>\u2753 Would you like to find out more about cost accounting and how it can benefit your business? Alterm\u00e8s can help you set up a cost accounting system within your company. Don&#8217;t hesitate to <a href=\"https:\/\/www.altermes.fr\/en\/contact\/\">contact our teams <\/a>to discuss your needs!  <\/p>\n\n<p>\u2757Discover how we helped a customer set up <a href=\"https:\/\/www.altermes.fr\/use-case\/reprise-de-la-gestion-comptable-dune-start-up\/\">a cost accounting system<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cost accounting provides objective accounting data on a company&#8217;s various expense and revenue items.<\/p>\n","protected":false},"author":3,"featured_media":247461,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[54],"tags":[],"class_list":["post-248975","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-expertise"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/posts\/248975","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/comments?post=248975"}],"version-history":[{"count":1,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/posts\/248975\/revisions"}],"predecessor-version":[{"id":248976,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/posts\/248975\/revisions\/248976"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/media\/247461"}],"wp:attachment":[{"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/media?parent=248975"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/categories?post=248975"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.altermes.fr\/en\/wp-json\/wp\/v2\/tags?post=248975"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}