Need For Cost Accounting In Service Companies

Need for cost accounting in service companies

Introduction

The accounting of the costs made by the manufacturing and other companies is mainly carried out to help the management of organizations to plan and control their activities. As organizations are greatly carried out in terms of structures, objectives and administration methods, in the same way the details of the cost accounting system will vary.

There are two important functional classifications of the systems used to finish costs, one of them is known as costing by work orders and the other would be cost accounting for processes. The first cumulative method of costs according to specific orders, lots or customer orders. The second method is more appropriate for continuous production systems in which it is impossible to establish differences between individual production units.

Developing

In industrial and commerce organizations, it is a common denominator to manage cost accounting, in order to obtain a control of the profitability and efficiency margin in the use of materials, labor and working capital, however not alwaysThe same happens with those companies whose purpose is to provide services.

This phenomenon is due to the fact that, in principle, there are no relevant merchandise or stock. On the other hand, this matrix does not opt for cost accounting for these types of companies, it is a nonsense, on the contrary it will help us to measure the performance of the organization and the impact of the methods established by the Board of Directors.

Due to this, we consider that the adoption of cost accounting by a services organization not only obeys the requirement that the Income Tax Law determines with respect to taxpayers that provide vital income from which non -compliance is awarded with apecuniary fine, but to the convenience of making the aforementioned measurements that, finally, the information related to the cost of the provision of services will be given and, with it, the relevance of the price of these.

Service companies use costing systems by orders or processes, according to the characteristics of the service they offer.

For example, the maintenance workshops of automotive agencies carry out work orders based on client specifications, while banking institutions work by processes, because the operations they carry out are repetitive and in large volume;Although this does not mean that there are no companies that use a mixture of both methodologies.

To determine the costs of the service companies, the characteristics of their turn must be taken into account. The appropriate cost management system will be the one that will give information of each of the stages in which the service is generated, as a basis for the establishment of a competitive price policy.

In fact, the need for cost accounting lies not in information as such, but in the interpretation you make of it and the way you use it to optimize productive processes and increase profits. That is to say, as well as the general accounting and the balances that derive from it, it constitutes an invaluable tool for successful decision making.

conclusion

It should be noted that commercial companies and service providers, regardless of their size and sector, should carry this type of accounting. It does not imply more work and does represent value information to optimize administration, make intelligent decisions and optimize expenses on different business fronts.