BUS 254 Chapter Notes - Chapter 3: Cost Accounting, Perpetual Inventory, General Ledger

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Michael Favere- Marchesi

Document Summary

Study objective 1: explain the characteristics and purposes of cost accounting. Cost accouning involves the measuring, recording, and reporing of product costs. Companies use this to determine both the total cost and the unit cost of each product. This info is used to determine which products to produce, what price to charge, and the amounts to produce. Accurate product cost info is vital for efecive evaluaion of employee performance. A cost accouning system consists of accounts for the various manufacturing costs. These accounts are fully integrated into the general ledger of a company. An important feature of a cost accouning system is the use of a perpetual inventory system. Such a system provides immediate, up-to-date informaion on the cost of a product. There are two basic types of cost accouning systems: (1) a job-order cost system (2) a process cost system. Used when manufacturing large quaniies of similar products. Producion is coninuous to ensure that adequate inventories are available.