Accounting System in a Company
Almost all the countries in the world allow foreign companies to compete with domestic firms nowadays, which make the costs of spending in the international trade plummet over the past decades. However, global markets provide more potential for the competitive companies. In other words, the companies have to face more challenges. If they can’t win the game, they will vanish from the global market. It is not a game winning by the capital; it is a competition with wisdom, good customer service, and in-time decision and so on. If they can get some useful information, selecting them among a great deal of data, papers, reports or something else to help them make ...view middle of the document...
But what are the full product costs? The sum of the job’s direct materials, direct labor, and manufacturing is its total manufacturing cost, in which can be combined into two components: inventorial product costs and period costs. Bamber, et al. gives us a specific definition about product costs, in their book “Managerial Accounting”:
Inventoriable product costs are from the third element of value chain in exhibit below: production for manufacturers and purchases for merchandisers. They are called inventorial costs because in addition to serving as one of the six building blocks for computing full product costs, these are the costs GAAP requires companies to use in computing inventory and cost of goods sold for the balance sheet and income statement. Period costs, also can be named as noninventorial
costs are the other five elements of the value chain to products and services. (p103, 2007)
(Bamber, et al., p103, 2007)
There are many ways for a company to trace the cost of direct materials they spend on the product, but for the indirect costs, sometimes it seems hard for them to trace, such as depreciation on the plant, because the company cannot determine exactly how much depreciation a particular product caused. Instead of calculating these indirect costs which cannot determine the precise cost of a specific product, companies prefer using one of two product costing systems that average costs across products: process costing and job costing. (Bamber, et al., 2007)
You can find the meaning according to the name: process costing takes the costs accumulated for each production process as its focal point, job costing builds up the costs for each individual job. (Bamber, et al., 2007)
In order to control the money spent on the product costs, accountants should provide enough accounting information to let the managers know each cost incurred for each job clearly, and help them manage the money spent on the product costs or cut costs in some way to obtain more profits, using cost tracing to assign direct costs, which includes direct material and direct labor that are used in the product costs.
Setting up charts of accounts
Recordkeeping is very important for a company to run its business. With the help of the numbers recorded in the accounting charts, managers can know the percentage of the money used in different areas during the product costs, so it is necessary for a cooperation to establish a full accounting system.
“The back bone of the recordkeeping system is the chart of accounts for your business,” Daniel Sitarz stated in his book “Small Business Accounting Simplified”, “a chart of accounts will list each of the incomes, expenses, assets, or debts that you wish to keep track of.” (p23, 2006)
Every business transaction that you make and every financial record that you create should be recorded into the chart, fitting at least one of those four categories. Most of the...