Full Cost Accounting is Necessary to Measure Aggregate Expenses
Full cost accounting refers to the process of collecting and presenting adequate information in the decision making process. This type of accounting recognizes economic, environmental, social cost, health and other factors in the action of decision making. It traces the figure of direct cost and collects indirect costs in order to measure aggregate cost of the production. This term is very popular in the green economics to count all types of costs witnessed in the production.
A company manager relies on the cost accounting to scale actual expenses of processes, operations, departments or product that is basic requirement of the budget. This accounting allows to analyze the functions and the use of funds. Very much similar to the financial accounting, the full cost accounting is also being used for internal use but it does not follow the generally accepted accounting principles (GAAP) because of its pragmatic approach. The full or true cost efforts are collectively called the Triple bottom line because it includes the basic three terms such as environmental, economic and social impacts. The ecoBudget metric used these three terms.
The International Organization for Standardization (ISO) involves several accredited standards useful in full cost accounting. Its application in the greenhouse gases, the ISO 26000 certification to define corporate social responsibility, ISO 19011 standard for audits is very effective and useful. This process creates a financial value out of the production of a product by measuring currency. It allocates a company’s fixed costs over a specific time period to evaluate what items are actually produced during that period.
The accounting information provided by the cost accountant is a result of operations, cost-benefit analysis, during the particular time period. Reports may be produced on daily, monthly, or yearly basis. The full cost accounting statement allows the users quickly get simplified and accurate knowledge on the status of asset of the entity. If a company uses the cost method of accounting for several investments, the consolidation worksheet entries will sophistically include all of them. The cost method of accounting demands less paperwork than the equity method. The cost method is preferably applied for lesser investment percentages in the business organization.