A cost account is a financial specialist who determines the actual costs associated with providing a service or manufacturing a product. They accomplish this by scrutinizing all of the associated expenses within the supply chain. The purpose of cost accounting is for profitability analysis and budget preparation. The financial data supplied by cost accountants help executives identify which products, services, processes or departments are least and most profitable, according to the Bureau of Labor Statistics.
Cost accountants are primarily responsible for collecting, validating and communicating data for the purposes of financial transparency and process improvements. They are responsible for the initiating the month-end closing and reporting processes, which they in turn submit to management. They set standard costs of business processes such as labor, shipping, production and administration.
They collaborate with accountants to leverage data obtained from ERP and CRM systems. Cost accountants perform ongoing reconciliations of various cost reports against software systems to ensure accuracy. Some perform physical inventory inspection duties with staff and monitor inventory management information systems. Cost accountants also provide support to finance personnel by helping out with payables, invoicing and capital expenditures
Cost Accountant Specializations
Cost accountants are familiar with all of the methods of cost accounting and their associated software programs. Having said that, there are actually four different types of cost accounting methods, so cost accountants may specialize in certain areas. First, standard costing systems assigns the average cost to every direct expense, such as labor, materials and overhead, that is associated with each product. This method of cost accounting is quite popular with small businesses because of its simplistic approach to standardization.
Second, activity-based costing determines the fixed and variable costs by comparing the direct costs associated with specific product lines. Third, throughput accounting concentrates on increasing efficiency through minimizing process and production bottlenecks in order to maximize output. Fourth, cost-volume-profit (CVP) analysis ascertains the variable and total fixed costs in accordance with the quantity level of products.
How to Become a Cost Accountant?
Those who want to pursue a career in accounting need strong math skills and knowledge of statistics. They should have the ability to quickly interpret facts and compare data in order to synthesize actionable business intelligence. Any job in accounting will require a bachelor’s degree related to finance, accounting or business administration. These degrees are intended to provide participants with a foundational understanding of organizational accounting concepts.
Topics covered include assets, liabilities, profitability analysis, tax regulations and the accounting life cycle. Students should be sure to take designated classes related to cost accounting. An introductory course will emphasize the development of sound strategies that promote effective decision-making related to budgeting, cost estimation and activity-based costing. A course in product based cost accounting will focus on merchandising and manufacturing processes. Students should also study accounting information systems and pay close attention to security and risk assessments.
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In order to advance their career, cost accountants should obtain standard licensure, such as a certified public accountant, or alternative licensure, such as the Institute of Certified Cost and Management Accountants’ Certified Cost Accountant accreditation.