Cost accounting is the process of recognition, classification, analysis, reporting all expenses incurred in the operation of business of the business. The goal is to provide detailed information on the exact cost of each product, project, or departments, from it support leadership control over resources, optimize profitability, and determine the reasonable price.
In production – business, costs incurred varied from raw materials, labor to the cost of joint production. If not manage properly, business is the cost team up, wasted resources as well as management reports does not reflect the true reality.
The article below Lac Viet will help business system complete knowledge about accounting, including the types of costs, the principle and method of accounting under current regulations, as well as instructions on how to control, cost allocation, as well as the application of accounting software to improve the efficiency of management.
1. Accounting what is the cost? Why is accounting so important in business
Cost accounting is the process of collecting, record, and aggregate and analyze the entire cost incurred in manufacturing operations – business of the business. The main objective is to determine the exact cost for each product, project, or department from which help businesses to manage resources effectively, calculate reasonable price as well as reporting on service management.
Role in financial management, cost control:
In management, corporate finance cost accounting role provides core data for control, decision making. When held, they cost accounting reflects not only the amount of money spent but also help leaders understand costs incurred where as well as the impact to business performance. This role is evident through the following aspects:
- Understand the cost structure & level of consumption of resources: When the expense is recorded in detail, businesses can know exactly the cost is raw materials, labor, production costs, general... from that optimize the use of resources.
- Detect irregular expenses & control deviations: keeping track of ongoing expenses to help identify the account irregularities, such as raw materials, excessive shrinkage or energy costs spike, help businesses make timely adjustments.
- Decision support in strategic management: cost Data is the basis for reporting, administration, profitability analysis by product, project, or department from which leaders make decisions about selling prices, investment, cut unnecessary costs.
Thus, the role of accounting beyond the recorded expenditures are tools, strategic management helps enterprises optimize cost, enhance the efficiency use of resources as well as increase sustainable profitability.
2. Classification of costs in business accounting
2.1. Classification of costs according to cost elements
Classification of costs according to factors help businesses understand the cost structure, from which effective management of the price calculation accuracy. The group main costs include:
- Raw material costs: Costs arising from the materials directly used in the product. For example, fabric, thread, daisies in sewing company. This cost directly affects the profit margin.
- Cost: includes salary, allowances, social insurance, with the bonuses directly related to your product or service.
- Production overhead: Cost is not attached directly to products, but are necessary for production, such as electric power, machinery, depreciation of equipment, materials, cost management workshop. Usually allocated according to criteria justified.
In summary, classification of cost according to factors to help calculate the price of precision, control costs and improve production efficiency.
2.2. Classification of costs in relation to output
Classification of costs according to the relationship with production help businesses forecast and manage costs when output changes. From there, production planning, optimal profit. The group main costs include:
- Fixed costs: Costs that do not vary even though production increased or decreased, for example rent, workshops, depreciation of machinery and property insurance. Understand fixed costs helps to plan production, calculate the breakeven point exactly.
- Variable costs: Costs change in proportion with output, for example raw materials, energy according to the time machine, the shipping cost according to the number of rows. Manage variable costs for the optimal profit when production changes.
- Mixed costs: combined fixed charges and variable, for example, electricity bills, water workshop: somewhat fixed as well as the change in output. Classify mixed costs help to forecast the exact cost, adjust the flexible budget.
Classification of costs according to the relationship with production assistance management reports, analyze the breakeven point to a decision reasonable production to avoid waste of resources.
2.3. Cost classification by function activities
Classification of expenses by function helps businesses determine the purpose of use cost in business activity, from which the optimal allocation of resources as well as effective control of finance. The group main costs include:
- Production costs: incurred directly for the production of products or services, is the basis for calculating the price and efficient management of production.
- Cost of sales: including the cost of advertising, shipping, commissions, sales staff. Expense manager helps optimize marketing effectiveness, enhance the profit margin.
- Cost management business: includes administrative costs, office products, personnel expenses general manager. Better control helps reduce waste, focus resources on activities that create revenue.
Cost classification by function to help businesses set up governance report in detail, assess the effectiveness each activity to strategic decisions, optimize costs to increase profits.
3. Duties & tasks of cost accounting business
Cost accounting noted not only costs but also help businesses to manage resources, the optimal cost to correct decisions, directly affecting the profitability and competitiveness.
3.1. Collect – recorded – set cost
This step is the foundation, because accurate data is the basis for all statement analysis cost reliable.
- Collect evidence from adequate: bill included the purchase of raw material, warehouse, board staff salaries, electricity bills, water along the indirect costs other. This ensures not overlook the cost, help, general accounting accurate.
- Cost allocation right, subject to the cost: Each account details need to assign correct for products, projects or departments responsible for the cost. For example, the cost of electricity factories can be allocated according to the number of hours the machine runs each product. Allocate the right help determine the actual cost, the reasonable price, control waste.
When the cost is collect the correct allocation, business reduce errors accounted for tracking the efficient use of raw materials and labor, at the same time, optimize cash flow.
3.2. Check – compare – cost analysis
After the data is gathered, the next step is testing and analysis to ensure accuracy as well as management capabilities.
- Detect irregular expenses: For example, if the cost of raw materials increased by 10% compared to the estimate that the output does not increase, this warning possibility of loss or waste.
- Compare the actual cost with the plan: Help assess the effective use of resources, identify parts or products which exceed the budget.
3.3. Reporting the cost of servicing administrator
Expense report is the tool directly to the leader board decision, from cost optimization to strategic direction.
- Expense reports according to the product, project, department: to Help identify the array cost the most, from which the optimal budget and improve profitability.
- Decision support management: cost Data for planning permission, sale price, reviews profit, decided to cut unnecessary costs or re-investment into operation profitability.
4. The method of cost accounting popular for businesses today
To administer, cost effective, businesses need to apply the method of cost accounting in accordance with production models, the peculiarities of trading. Choosing the right method to help control costs, calculate the price of the exact same time provide reliable data serves strategic decisions.
4.1. Method set direct costs
This method is consistent with the business whose products or services simple, low cost direct clear and easy to identify for example, company apparel, manufacturing, electronic components, small or printing services.
Advantages:
- Recorded cost, fast, transparent and easy to track each product or project.
- Support reporting, cost price calculation accuracy.
Restrictions:
- Not good control of indirect costs as large as depreciation machinery, electricity, water, cost management workshop.
- Apply less effective for businesses with multiple products, multiple production stage complex.
Businesses can save time reporting in order to increase the accuracy in accounting for expenses, from which optimize cash flow management as well as improve the profit margin.
4.2. Methods to allocate indirect costs
The target allocation formula is often used:
- The number of hours the machine or worker: in accordance with cost, power cost indirectly.
- The proportion of raw materials used: Match the cost of maintenance, repair machinery.
- Area or volume of production: in accordance with cost management workshop, administrative costs to the workshop.
Illustrative example: A sewing factory use 10 sewing power cost month is 50 million. If a product using machine 5 hours in total of 100 hours of machine power cost allocation for this product is 2.5 million. This method helps the business determine the full cost for each product, from which price calculation accuracy.
4.3. Method of cost accounting according to the
Role in cost control is to plan the cost is based on the consumption of raw materials, labor, and materials. Actual costs are then compared with the level to detect waste or deviations, from which measures of adjustment.
Business suit large-scale production:
- Businesses produce multiple products of the same type, with the direct cost volatility.
- Support standardized processes, effective control of raw materials, workers.
5. Accounting accounting cost circular 99/2025/TT-BTC
5.1. Principles of accounting costs
The accounting costs must comply with the accounting principles prescribed by law, in which Circular 99/2025/TT-BTC of the Ministry of Finance issued Regulation Mode, the new enterprise accounting is the important legal basis, effective from the date 1/1/2026 replace circular no. 200/2014/TT-BTC. This is the circular guide general accounting system, including the principle of recognition of expenses in the business .
The basic rules when accounting for expenses:
- Matching principle: Expenses should be recorded in the accounting period in which the cost that arises, not pre-recorded or recorded to reflect the business activities. Circular 99 insist track expenses according to factors arise, the types of costs to ensure the accuracy .
- Principle of consistency: the Enterprise need to apply the unified method recognition and allocation of costs through the states, helping expense reports can be compared over time.
- Guidelines caution: Recorded full and honest, the costs incurred, in which indirect costs must be treated according to the method of matching account as well as the allocation formula was determined.
- Compliance with accounting standards & current law: accounting must follow accounting Standards in Vietnam (VAS), especially VAS 01 regulatory accounting principles generally as accrual basis, and through caution to the reports properly reflect the financial situation of enterprises .
Compliance with accounting principles help to reduce errors in accounting costs, ensure data faithfully reflect business activities, at the same time meet the requirements of audit and tax settlement.
5.2. The account usually refers to accounting for expenses
In cost accounting, production – business, the basic account is often used include:
- TK 621 – the Cost of raw materials, live: Recorded cost of raw materials used directly for the product. For example, in company, garments, fabrics, only, daisies... be put into production will be recorded in TK 621.
- TK 622 – Cost, direct labour: includes salary, allowances, social insurance of workers directly involved in production. For example, wage workers sew a shirt will be accounted for in TK 622. This account helps to manage labor costs, calculate the price of the exact product, as well as assess the effective use of employees.
- TK 627 – the Cost of joint production: include the indirect costs such as electricity, water factory, depreciation of machinery, materials and accessories. Costs are not tied directly to a specific product, but is mandatory part to calculate the price of full. For example, power sewing workshop or depreciation sewing machine will be recorded in TK 627.
- TK 154 – Cost unfinished production & price of products: Synthetic cost, 621, 622, 627 of the finished product or are unfinished production. When the finished product, the entire cost of this is the switch to TK 154 to calculate the price of the exact for the product and service management reports.
Understand the role of each account to help businesses easily cost analysis, detect waste, control of resources and establishment management reports accurately, meet the legal requirements to support strategic decisions.
5.3. By accounting for expenses details in business
Recorded accounting of the cost of raw materials directly (TK 621), direct labour (TK 622), the cost of joint production (TK 627) and the total combined shipping (TK 154) according to the regulations:
| Type of cost | Account use | Principles & accounting accounting |
| Raw material directly | TK 621 | – When purchasing raw materials:
When used in production:
|
| Direct labour | TK 622 |
(salary, insurance, allowance related) |
| The cost of production in common | TK 627 |
(the indirect costs such as electricity, water, depreciation...) |
| General, the shipping cost | TK 154 | When the finished product or end of the transfer:
|
Accounting of expenses by account-specific help businesses track the exact cost for each category, the timely detection of expenditure exceeding the level to adjust the production plan – business, and as a basis for reporting on internal financial reporting and compliance standards, meet the requirements of audit – tax settlement.
6. Accounting software Accnet ERP – solutions improve the efficiency of cost accounting in business
In the context of businesses today have to manage production costs as well as operating increasingly complex. Application software accounting as Accnet ERP become solutions essential to automate, optimize accounting for expenses. This software not only acknowledged the cost, but also to support analysis, control, decision-making based on accurate data.
Salient features of Accnet ERP in business cost management:
- Automatic recognition – set – allocation of costs: automated Systems of accounting, the cost of raw materials, labor cost joint production by product, project or department. This eliminates errors when accounting manually make sure all expenses are tracked full, true objects bear the cost.
- Expense reports in real time: Businesses can track expenses by the day, by the week or by specific projects, at the same time timely detection of expenditures unusual or beyond the level.
- Contact information of data between accounting – production – management: Accnet ERP data integration between departments, from warehouse, production, to accounting, to help reduce errors due to input many times, optimize workflow, as well as shorten the duration of synthetic data.
- Support price set of precision: From cost data updates full automatic software synthesis as well as the shipping cost into the product price. Help business strategic decisions faster and more efficiently, particularly in product management, project or new product line.
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Cost accounting is a critical tool to help businesses optimize resources, control costs to improve profitability. The recognition, classification, analysis, and accounting for the exact cost not only ensure management reports reflect the reality but also support strategic decisions in a timely manner. Understand the business principles as well as the accounting method that will be active in production planning, the draft budget for product pricing, thereby improving operational efficiency and competitiveness in the market.
