Cost of Accounting

An accomplished sales professional, Sanjay Paharia works as an associate at the Lauderdale-based telecommunications distribution company, Florida Gold Dist. Prior to arriving at the firm, Sanjay Paharia acquired his education and training from Sydenham College in Mumbai, India, where he majored in business with special emphasis in cost accounting.

Cost accounting is a branch of accounting that focuses on recording and analysis of costs. It plays an essential role in the business process because it measures performance and efficiency - two important elements of decision making. Reports generated by the cost accounting process are used primarily by management to provide insight into the company cost structure and help them make the right operational decisions.

Generally used in manufacturing and processing activities, cost accounting deals with three major components of product costs: direct materials, direct labor, and factory overhead. All three components apply to the two types of costing techniques used in cost accounting: job costing and standard costing.

Direct materials refer to raw materials used to produce the product. Direct labor pertains to the labor costs associated with the direct production of the product. Factory overhead involves other costs required to produce the product but are not directly traceable to the product, such as electricity or machine depreciation.