5b. Cost Accounting
Cost Accounting is the process of tracking, recording and analyzing individual costs associated with an organization’s activities. Cost accounting is a critical tool that allows an organization to determine the full cost of each of its activities by identifying each element of cost contributing to the activity. Cost accounting allows organizations to turn financial data into knowledge that is useful for the following:
- Understanding and reporting what it actually costs to deliver an activity
- Tracking the adherence of the activity to its budgeted cost projection
- Setting clear revenue goals to ensure continuation of the activity
- Evaluating the cost effectiveness of specific activities
- Evaluating the cost of expanding a program or savings that come with reducing an activity