Cost Accounting For Dummies. Kenneth W. Boyd

433

      423  434

      424  435

Introduction

      The world needs accountants. People who know how to do accounting make the business world go round. Accountants analyze and report on every aspect of a business.

      Cost accounting can be the most difficult accounting topic to grasp. This area has a unique language — a set of terms that differ quite a bit from other areas of accounting. Students and business owners may find cost accounting more challenging than other areas of accounting.

      I wrote Cost Accounting For Dummies because your ability to understand this material has a huge payoff. Every business can be improved using cost accounting. The concepts help you to lower costs and increase profits. I’m passionate about helping you learn more about these critical topics.

About This Book

      Some cost accounting books overwhelm you with dozens of complex topics. Not Cost Accounting For Dummies. Here, I focus on the really important topics that are used the most often. Accounting knowledge is meaningful when you can use it to solve a problem.

      As a friend of mine once said, “It’s hard to drink out of a fire hose,” so I present the material in this book in an easy-to-read reference format. The book is logically divided into parts. Each part contains several chapters that are divided into readable “chunks” or sections. This system avoids blasting you with information. Instead, topics are introduced at a steady (but not overwhelming) rate, with concepts building on one another, making the reading (and understanding) easier.

      The great thing about the book is that you decide where to start and what to read. It’s a reference book. You can locate a topic in the table of contents or the index, read about it, and move on. Accountants love organization (most accountants place their pencils in order from shortest to longest). This book is organized to be a quick reference.

Foolish Assumptions

      I had to make some assumptions about you, the reader. As I wrote the book, here’s what I assumed:

       You’re someone who needs an easy-to-read overview of cost accounting. Also, you want to investigate the topics that are used the most often to solve problems. You may be reading this book while taking a cost accounting course, but a business owner who needs more cost accounting knowledge should also find value in reading it.

       You’re able to follow basic arithmetic and algebra. Many items you need to calculate appear in the form of equations. Accountants love to create an x or y variable and then solve for that variable, using an equation.

       You have a beginner’s-level knowledge of how a business works. You understand that sales less expenses equals profit. You’re aware that a business needs to have capital (cash, equipment, and so forth) to operate.

       You’re willing to read, pause, and assess what you’ve read. Learning cost accounting takes some effort. It’s not the sort of thing you can rush through. Whereas the text makes it easy to find information, it takes some effort to understand what you read. After you get it, you can use cost accounting to improve your business for years to come.

Icons Used in This Book

      To make this book easier to read and simpler to use, I include some icons that can help you find and fathom key ideas and information.

      

This icon appears whenever an idea or item can help reinforce your understanding of a concept. A tip might make it easier to remember a topic.

      

Any time you see this icon, you know the information that follows is so important that it’s worth reading more than once.

      

This icon flags information that’s a big concern. Warnings critical to your business are tagged with this type of icon.

This icon appears next to information that’s interesting but not essential. Don’t be afraid to skip these paragraphs. But come back at a later date and check them out. They’ll be waiting for you.

Beyond the Book

      In addition to the abundance of information and guidance related to cost accounting that we provide in this book, you get access to even more help and information online at Dummies.com. Check out this book’s online Cheat Sheet. Just go to www.dummies.com and search for “Cost Accounting For Dummies Cheat Sheet.”

Where to Go from Here

      This book is organized so that you can go wherever you want to find complete information. Want to know about product pricing, for example? Head to Chapter 12. If you’ve taken an accounting course or two, start at Chapter 3 with cost-volume-profit. You can use the table of contents to find broad categories of information or use the index to look up more specific topics.

      If you’re not sure where you want to go, you may want to start with Part 1. It gives you all the basic info you need to understand cost accounting and points to places where you can find more detailed information.

Part 1

      Understanding the Fundamentals of Costs

IN THIS PART …

      So you’re ready to learn all there is to know about cost accounting. You’ve come to the right place! Part 1 introduces cost accounting terms as well as some basic methods of analysis.

      You compare cost accounting to other accounting methods and learn four important cost terms: direct costs, indirect costs, fixed costs, and variable costs.

      You also find out about product and period costs, cost-volume-profit (CVP) analysis, and job costing. Process costing and the flow of manufacturing is also looked at.

Chapter 1

      So You Want to Know about Cost Accounting

      IN THIS CHAPTER

      

Understanding accounting methods

      

Comparing cost accounting systems

      

Controlling your costs