In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost contains all costs necessary to acquire an asset in place and ready for use. For example, the cost of an item in inventory also includes the item’s freight-in cost. The cost of land consist upon all costs to get the land ready for its use.
Following is the difference between Financial Accounting and Cost Accounting Financial Accounting Cost Accounting 1.Provides information to external 1.Provides information to internal users. 2. Provides general purpose financial statementsand reports 2. Provides special purpose statements 3. Must conform to generally accepted accounting principles 3.
Beginning Work in Process Inventories Average Costing Method: When beginning work in process inventory costs are merged with costs of the new period, the problem is essentially one of securing representative average costs. Ordinarily, the averaging process is quite simple. Example: The Clonex Corporation
Beginning Work in Process Inventories First In First Out (FIFO) Costing Method: It is possible to keep beginning work in process inventory costs separate rather than average them in with the additional new costs incurred in the next period. This procedure gives separate unit