Maybe you are not familiar with accounting terms? This accounting is needed and has many roles in the financial process of a business or company. What would happen if your company did not use accounting as a process to control every finance of your company? Of course it will make it difficult for you to control each of your finances and your company.
Therefore it is important for you to learn it. With the accounting, the recording and translation of financial information can also be recorded in a systematic way. But in accounting, you also need to know what the cost accounting cycle is, and what types are there in the cost accounting cycle.
What is the Cost Accounting Cycle?
The cost accounting cycle is a stage or process in conducting an analysis of recording business transactions.
The process carried out during the accounting period in recording data, classifying, determining total costs, determining product costs, determining selling prices, controlling costs and making decisions.
For example, in an industrial company, of course there is a production activity such as in managing raw materials into a product that is sold to consumers. So we can see that in the accounting cycle there are several stages or processes that must be carried out in carrying out the accounting cycle.
Types of Cost Accounting Cycle
Of course, the cost accounting cycle has several types, but from several types of accounting cycles, in each company the cost accounting cycle that is owned is certainly different, because it is influenced by the cycle of activities or processes carried out in each company. Here are the types:
1. Cost Accounting Cycle in Trading Company
A trading company is a company that prioritizes its business in buying goods from suppliers or distributors and selling them to consumers without changing a form of goods. Examples are grocery stores and supermarkets. In terms of doing business, buying daily necessities is an obligation from a supplier and reselling them to consumers.
The accounting cycle in a trading company is no different from that of a service company. Either a service company or a trading company must record all transactions in a journal and then periodically record them in an account in the general ledger.
At the end of a period, the total account balance is calculated and should be stated in a worksheet as an information tool for preparing a financial statement. Adjusting and closing entries are also made in trading companies, and the preparation of post-closing trial balances must be done as the final stage in the accounting cycle.
Understanding the accounting cycle for a merchandising company seems complicated, but it is necessary because it is a requirement in the preparation of financial statements. In order to understand the flow of financial statements, users are expected to be able to know and recognize an accurate financial position.
2. Cost Accounting Cycle in Manufacturing Companies
Manufacturing companies have several different accounts compared to service and merchandising companies. It includes three types of inventory accounts namely, raw materials, work in process, and finished goods.
Where every finished item will be entered and stored in the warehouse. The cost accounting cycle found in manufacturing companies starts from recording the price of each raw item to be used, then recording other costs incurred such as labor costs, factory overhead costs, and others.
Cost accounting in manufacturing companies has the aim of presenting information on the cost of production, and this accounting cycle is also used to follow the process of managing a product, starting from the beginning of the entry of raw materials in the production process, and ending with storage and becoming a product that is ready to be marketed.
3. Cost Accounting Cycle in Service Companies
Activities in the cost accounting cycle in service companies are started with the preparation of service delivery and end at the service users. The cycle in this company only starts from recording costs for preparation for delivery only to the hands of service users. The aim is to present the cost per unit of service, which is used by service users.
In the cost accounting cycle, it is the most important part in doing a good calculation of the costs you want to spend in making a product, or recording every financial calculation of the business you run. Therefore, to produce neat financial records, and avoid miscalculations in the preparation of financial statements. You can use Accounting Software.