The Importance of Cost Accounting for Business Management

CHAPTER ONE

• INTRODUCTION

The role of cost accounting cannot be over emphasized as it is needed to assist the management in planning, controlling and organizing the business activities in order to achieve its objectives.

Ever since the use of money replaced barter, people have been concerned with costs.  However, it was the concentration of manufacturing facilities in the factories which gave impulse to the development or recognizable costing systems.  On the other word cost accounting is probably the field of account which has developed most within the half – century and there can be no doubt its growing importance. 

This is partly a reflection methods which results in greater capital investment and higher proportion of indirect costs and partly a reflection of growing completion and widening markets.  All these factors necessitate the keeping of systematic and accurate records which will show the cost of goods produced.

There is constant level of activities in any industry engaged in manufacturing and sales of products manufacturing industries are made up of different sections in which people are continuing toward changing the form of raw – material in order to supply the customers with desirable product.

In addition, the highest level of management should receive management reports on various aspects operation to show actual results against estimates or projections.  This will enable to management to know whether things are not moving as planned and to make necessary corrective measure or obtain on time or otherwise to adjust its plans.

Costing is a scientific tool in management; it involves the classifying recording and allocating expenditure for the determination of cost of production and services and the relation of these costs of the scale value and the determination of profits. 

Costing enable a business not only to find out what various jobs or processes have costs, it indicates where losses and waste are occurring before the work is finished and there immediate action may be taken, if possible to avoid such loss or waste.

1.1   OBJECTIVE AND PURPOSES OF STUDY

The primary objective of this study “ Cost accounting significance to the management” is to show people  in the management hierarchy and all person s concerned and interested  on how cost information can  be used as an aids to planning, controlling, profitability, decision  making  and survival of business organization within the frame work of the manufacturing  concern.

It is  also desired that management  should be provided with a basis for pricing  policy for which  it may require information  with regard to margin cost or the calculation of the “ break-even points”.

In a nutsh ell, the study intend to make a review assessment  and analysis to the r effective and efficiency management of business organization as well as a critical  analysis of costing  with a view to spoil using problems in the implementation   and possible solution .

It is hope that this project work will be of importance not only to the case study, but generally all  organization  and  to the student  in various schools of business administration  and management who  may come across it.

• SIGNIFICANCE OF THE STUDY

Due to the constant increase in the size of the business organization, these organization demand costing system for example cost accounting helps in indicating  to the management  any inefficiencies and the extent of various forms of waste whether of materials, time and expenses or in the used of machinery, materials, time and expenses or in the use of machinery , analysis of the  causes of unsatisfactory  result may indicate  remedial action.

Meanwhile, the main significance of  this project is to provide information and understanding on the use of  information  the cost accounting provides on the affairs of the  company and how it serve as aid to management of business  organization.