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Everything a company produces, costs the company a certain amount. Cost accounting is the method by which these amounts are managed and handled efficiently. The manufacturing process of the products require some labor, raw materials and supplies, these components costs the company rapidly. Sometimes managing and keeping a track of these components becomes difficult. In this situation cost accounting proves to be very useful because it categorizes the cost of every resource in a structured way. Cost accounting consists of certain steps. Let's know them in detail:-

Standard Costing

This is an inventory upliftment function of the system. It works very systematically and is the most tradity way of managing accounts. During the manufacturing of goods, labor and raw materials are needed. The calculation of the cost behind these materials are managed by standard costing. According to the inventory, policy decisions are made. It has one drawback that it can affect the performance of a manager during evaluation. This type of costing has a special way of accounting which is, it uses ratios called efficiencies to compare the labor and raw materials involved.

Activity Based Costing

This is a function which segregates the cost according to the products. It defines it's name by doing costing based on activity. This helps the function to know about the actual consumption rate. It also introduces those products in those regions where the sale of the item is good, in this way the company gets a better yield. Resources are used in a wiser way by observing the records of activity based costing. This eliminates the application of those services which are not profitable and costs the organization huge losses.

Lean Accounting

Lean accounting is the way of discovering the shortest cycle for transporting the goods and finances through a route which does not cost the company much. This helps the company to consume time, resources and finance. By this type of accounting the organization can plan an improved evaluation technique for inventory, modify financial statements which improves company's performance. With the help of this way of accounting the company can increase it's profit margin. This is also quite efficient in planning the budget of funds and investments of the company.

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