What Is a Cost Accounting System?

According to AccountingExplained.com, companies use cost accounting systems to determine operations costs and estimate accurate costs of production. Cost accounting systems provide information in inventory valuation and cost control. Job order costing and process costing are the two main cost accounting systems.

A cost accounting system requires five parts that include: an input measurement basis, an inventory valuation method, a cost accumulation method, a cost flow assumption, and a capability of recording inventory cost flows at certain intervals. The cost accounting systems can be important sources of information for the managers of a company. Managers must understand the forces and weaknesses of the company's cost accounting systems; this allows them to actively participate in the evaluation and evolution of the cost measurement and administration systems.