Chapter 10: Cost accounting

appreciable

large or noticeable enough to have a significant effect

bottom-line

the final line in the accounts, the net profit or loss made by a company

breakeven point

the figure at which neither profit or loss is made

cost accounting

the process in which all costs are examined

cost reduction

the process of minimizing any expenses due from direct business activity

costs incurred

any expenses due as a direct result of business activity

feasibility

the possibility that can be made, done or achieved or is reasonable

implement

to put into effect

notional

existing as an idea or as an approximate amount

opportunity costs

the imagined loss made on not following a certain course of action instead

overall

in general rather than in particular

project

to calculate an amount or figure expected in the future based on information in the present

relative

as judged or measured in comparison with something else

successive

happening one after another

underlying

real but not immediately visible

cost centre

a unit of activity in an organization for which costs are calculated separately

variable costs

costs that depend on the amount produced

profitable

adjective meaning providing income for a company

fixed costs

costs that do not change according to the production volume

absorption costing

As well as direct manufacturing costs - materials and labour - we allocate part of our fixed and variable manufacturing overheads to the cost of every product.

activity-based costing

We identify all the different functions within the company, and assign costs to products and services according to how much these functions are involved in the process of providing the products and services.

purchases

goods which are bought by the company

trial balance

This is drawn up to check that the two sides of the accounts are the same

ledgers

The official books for keeping accounts

objective principle

This is one of the justifications for historical cost accounting, which requires no subjective assessments of replacement values.

principle of materiality

This means that insignificant trivial expenses, like each pencil or typewriter ribbon, need not be accounted for separately, but are exempted by principle of materiality

principle of conservatism

This is the contrary of recording “below-the-line” items

journals

Bookkeepers record every purchase and sale that a business makes, in the order that they take place, in _____

vouchers

Businesses are obliged to retain the documents – known as _____ – that support or prove an item in an account, and make them available to the internal and external auditors who check the accounts