Relationship between Cost Accounting and Business Enterprise
Cost accounting, like will be mentioned later to adopts a cost center approach to accounting for costs. A cost center is any type of entity in the organization along with respect to those costs can be accumulated and identified; it could be a physical entity as like a product, a geographical entity as like a division or region, or it can be conceptual entity as like a department. The relationship among the nature of the business and cost accounting stems from the fact such the accumulation of costs into cost centers is completely dependent on the nature of the business enterprise. As like what is a cost center in one business enterprise might not be a cost center in other business enterprise.
The business enterprise may be such like:
a) Individual orders are obtained from customers for work that is undertaken according to the particular requests of the customer or particular order costing
b) Output is the conclusion of a series of continuous operation or processes or process costing
c) A service is given to the customer or service/ operation costing
A cost unit may be defined like the quantitative unit of service or product in relation to that costs are ascertained. The cost unit will be determined through the nature of the business enterprise. It may be as:
- An individual batch or job
- A unit of production expressed like a relevant quantity as like Kilogram litre.
- A Unit of service as like when patient day in hospital or graduate in a higher educational establishment.
The management and costing accounting system is operated and designed that like costs can be accumulated and identified for all unit of output. The costs are then accumulated for the different cost centers and further analysis complete to produce useful information for controlling, planning, performance evaluation and decision-making.