Costing system – the system that an organisation has developed to collect information about costs and income so that it can be used to help with decision making, planning and control.

Management accounting – the area of accounting that includes costing: it concentrates on providing internal information about the future in a form that is useful; it has no externally set rules that must be followed.

Financial accounting – the area of accounting that includes book-keeping; it concentrates on providing historic information that can be used internally and also provided to external parties.

Budget – a future plan for an organisation, showing all the detail in financial terms; it is usually made up of various individual budgets.

Cost classification by element – grouping costs together according to the type of cost based on three categories – materials, labour and expenses (overheads).

Cost classification by nature – grouping costs together according to whether they are direct costs or indirect costs.

Direct costs – costs that are directly identified with the units of output (the products or services that the organisation makes or provides)

Prime costs – a term relating to the total of direct costs; it is often used to describe the total direct cost for a unit of output.

Indirect costs (overheads) – costs that are not directly identified with the units of output; these costs are divided into production and non-production costs in a manufacturing organisation.

Cost of production – a term relating to the total of direct costs and indirect production costs (production overheads).

	Created by tomfaulkner over 13 years ago

Accounts (Basic costing) Note on Basic CostingChapter 1,2,3, created by tomfaulkner on 20/05/2013.