What is Cost Accounting? The Basics

A basic cost accounting definition includes the preparation of financial statements and the calculation of a business’s products and processes. The concept is, that a cost accountant will play an advisory role to help companies best utilize their monetary resources.  It’s easy to see why they are needed in various sectors, the largest of them include manufacturing and the service industry.

Cost accounting basics also include reviewing the systems that are used for data collection, reporting, and resolving issues related to cycle counting variances. A cost accountant will be responsible for creating a budget and managing expenses, and he or she will need to keep records according to their category, date, location, and other variables so that analysis can be performed on the data later on.

A good cost accounting definition will also include helping companies analyze break-even points so that losses can be avoided, and they will work to develop plans with executive management teams. The cost accountant title is, essentially, that of a leadership role, and it is vital, therefore, that candidates develop excellent communication skills. A cost accountant will have access to confidential materials and will need to convey ideas in a sensitive manner.

Cost accountants will also need to break down complex ideas, so that everybody can understand them, and he or she may be required to visit the various departments within an organization and learn about their procedures. Relationship building is an integral part of the job and will help a cost accountant achieve success in his or her chosen field. Presentation skills are also a must, as cost accountants will need to provide a summation of key issues along with their proposed solutions.

Steps to Becoming a Cost Accountant

  • Get an education: Cost accounting standards can vary, but the minimum requirement is an associate’s level degree for an entry-level position. Ideally, students should aim to acquire a bachelor’s degree or their MBA with a focus in accounting, as they will need to learn such valuable skills, such as business law, financial analysis, cost accounting standards, and the principles of economics.
  • Get certified: Your accounting program will give you all of the knowledge and credits you need to become an accountant, but taking the exams to get your CPA license or to become a Certified Cost Accountant (CCA) will up your chances of getting a job.
  • Get ahead: People who become cost accountants are often able to eventually move into higher positions, such as treasurer, budget director, and even the president of a corporation.  The data shows that very few people log more than twenty years as a cost accountant for this reason.

How Much Do Cost Accountants Make?

Cost accountants can earn between $45,000 and $85,000 per year, and the average salary is $61,000. A major factor in these figures is the amount of time a person has spent working in the field of cost accounting, as the highest-end salaries increase to $71,000 for persons employed less than three years and up to $85,000 for those working fifteen years or more in this position. These figures can also vary by location, with urban areas typically paying a higher wage.

Experts project that the field of accounting will continue to grow until at least the year 2024, and professionals who hold a CPA or a CWA certification show the best work prospects. An 11% increase in job openings is expected, and this amounts to 142,000 opportunities for employment. Much of this has to do with the introduction of legislation that businesses need to follow regarding taxes and financial laws, requiring companies to hire cost accountants to provide oversight in this area.