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Cost of Accounting Systems - Coggle Diagram
Cost of Accounting Systems
Cost
Cost of a product or service is the expenditure incurred on producing it
Cost Center
CIMA defines a cost center as ‘a location, person or item of equipment or (group of these) in respect of which costs may be ascertained and related to cost units’ centre.
Cost center helps the accountant in ascertaining costs and help with the cost control
Cost centers are the breakdown of a business into sections where costs can be collected or charged
Cost Unit
Cost unit is a quantitative unit of product or service to which cost can be related
The nature of the unit cost will obviously depend on the type of goods being produced or of the service being offered by the business concerned
Cost always related to objects, functions or services. We associated cost with quantity of product or service rendered
Responsibility Centers
Unit of a firm where an individual manager is held responsible for the unit’s performance.
REVENUE CENTRES: managers are accountable only for financial outputs in the form of generating sales revenue
PROFIT CENTRES: units within an organization whose managers are accountable for both revenues and costs.
COST OR EXPENSE CENTRES: managers are normally accountable for only those costs that are under their control
INVESTMENT CENTRES: responsibility centers whose managers are responsible for both sales revenues and cost and in addition have responsibility and authority to make working capital and capital investment decisions.
Analysis and dissemination
of information
Cost and management accounting system
should generate information in order:
to provide relevant information in helping
managers making better decisions
to provide information for planning,
control and performance measurement
to allocate cost for internal and external
profit measurement and inventory valuation
A database should be maintained, with cost appropriately coded and classified, so that relevant cost information can be extracted to meet each of the above requirements. A code is a system of symbols to classify item and for reference.