Cost accounting is the most important part of cost management. In some countries cost accounting is an integral part of the business. It plays a vital role in assessing the costs and assessing whether the cost should be increased or reduced.
Inventory management is the process of dealing with the flow of goods from the customer to the warehouse and vice versa. It helps in creating inventories in order to compare the stocks of the products that are still needed and the ones that are surplus. The process also provides the location where the products are stored. The inventory is a record of the items that have been purchased from the customers.
Inventory recording and controlling involve the measurement of the actual stock. It contains a complete set of information regarding the stocks purchased and sold from the company. Inventory recording is an activity that involves the calculation of the percentage of unsold stocks and the volume of inventories based on inventory size and rates. For example, if a large number of products have been sold, then the price charged by the vendor for those products is high. If there are only a small number of products to be sold, then the prices charged by the vendor are lower.
Administrative expenses are the costs incurred in the normal business operations. It includes the expenses that are not directly related to the products or services offered by the organization. There are two types of administrative expenses:
Long-term costs are the costs incurred for any goods or services bought from the outside. It is calculated by dividing the total of the selling and administrative expenses by the period of the organization. It is a common practice to use an average rate of costs over a long period of time.
Short-term costs are those that are incurred in the purchase of goods from the outside. It is a good practice to use the difference betweenshort-term and long-term costs. It is calculated by dividing the difference between these two amounts by the period of the organization. For example, if the organization has expenses of three months that are less than the short-term expenses of one month, then the organization incurs a large amount of short-term costs.
Tax accounting is the area of taxes that involve tax collections and they are the basis of calculating the tax rate. A process called the profit and loss method are used for tax accounting. It is very common for tax reporting to include costs associated with inventory sales, purchases, and cash purchases and to include the taxes paid in the cost accounting.
Asset management is the process of overseeing the inventory of the company. It deals with keeping the inventory filled with inventory that should be replenished at regular intervals. The process also involves maintaining the in-stock rate of the products and the establishment of a standard rule of inventory turnover for items that need to be replenished regularly.