Financial accounting looks backwards and outwards: it tells shareholders, HMRC and lenders how the business performed last year. Management accounting looks forwards and inwards: it gives managers the numbers they need to make day-to-day decisions, should we price this job at £8,000 or £9,500? Are we spending too much on overtime? Would a bigger machine pay for itself?
Cost accounting is the part of management accounting that focuses on what things cost. Level 2 focuses on the mechanics of putting the right cost against the right cost object, a product, a job, a department.
Coding costs
Every cost is given a code so the accounting system knows what it is (a material or a wage or a rent), where it belongs (which cost centre), and often how it behaves (fixed or variable). A well-designed code lets you total costs by any of these dimensions without re-keying anything.
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