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Study Notes

Cost accounting is a branch of accounting that provides detailed information and real-time data to support management decision-making, planning, and control.
It differs from financial accounting, which provides aggregate information for external reporting. Financial accounting focuses on the overall financial position, while cost accounting focuses on the detailed costs of production.

Data type: Financial accounting uses historical financial data. Cost accounting uses actual or estimated data.
Time frame: Financial accounting covers a yearly period (fiscal year). Cost accounting covers shorter periods for decision-making (daily, weekly, monthly).
Reporting scope: Financial accounting reports on the entire organization. Cost accounting often focuses on specific departments or products.
Purpose: Financial accounting provides information to external stakeholders (investors, creditors). Cost accounting helps internal stakeholders (managers) to make decisions.
Reporting frequency: Financial accounting reports are prepared at the end of an accounting period. Cost accounting reports can be prepared more frequently.
Regulation: Financial accounting follows standard GAAP (Generally Accepted Accounting Principles). Cost accounting is not bound by specific standards as it is for internal use.
Data detail: Financial accounting is summary-level. Cost accounting is detailed and very specific to the product.

Cost: A sacrifice of resources to achieve a particular purpose.
Expense: A cost that has been used to generate revenue during a specific period.
Expenditure: A payment for resources acquired.
Cost of goods sold: The total direct costs (materials, labor, and manufacturing overhead, depending on cost accounting system) that are used to create a product.
Period cost: Costs that are not directly tied to the production of goods but rather expensed during the specific accounting period.
Direct costs: Costs that can be traced to a product.
Indirect costs: Costs that are not directly traceable to a product.
Fixed costs: Costs that do not change with the activity level in the short term.
Variable costs: Costs that change with the activity level.
Opportunity Cost: The potential benefit that is forgone when choosing one alternative over another.
Sunk Cost: A cost that has already been incurred and cannot be recovered.
Relevant Cost: Costs that differ between alternatives.

Product costs: Costs assigned to a product.
Period costs: Costs expensed during the period incurred.
Direct costs: Costs that can be specifically identified with a particular product.
Indirect costs: Costs that cannot be identified specifically with a particular product.