CHAPTER VIII 

 COST ACCOUNTING 



Definition. It has been said that all accounting is cost 

 accounting. It might better be said that all accounting 

 should be cost accounting. Since there is so much account- 

 ing, in the broad sense, however, that records only ea^h 

 transactions, inventories, deferred charges, and depnvia 

 tions without attempting to distribute expenses properly 

 over the various productive elements, it is still quite proper 

 to consider that there are two terras in proper use, "ac- 

 counting," and "cost accounting." 



A cost system is a method of apportioning elements of 

 expense and income over a number of operations within the 

 same business. Cost accounting is that interpretation of 

 transactions and operations of a business which aims to 

 carry out the purpose of the cost system. Cost accounting 

 results in showing the proper expenses, income, and net 

 gain or loss of each element or department of the business 

 that is maintained for the purpose of producing income. 



For the purpose of a cost system, the term "expei 

 must include something more than an outlay of cash for 

 some commodity or service to be consumed within a short 

 space of time. That is, it must include other than so-called 

 cash expenses. 



By the term " operation " in farm cost accounting is 

 meant each of the several crops or classes of livestock which 

 are grown or maintained on the farm. The "productive 

 elements " on a farm include practically the same articles 

 or bodies as the operations, except that draft animals are 



218 



