COST ACCOUNTING 



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not considered as productive elements. The latter are not 

 kept for the purpose of making a profit, but merely to 

 assist in reducing costs of production among the really 

 productive elements. 



Cost and General Accounting Compared. A comparison 

 between a set of accounts kept under a cost system and 

 one kept under a general system might be summarized as 

 follows : 



(a) The cost system includes all that the general sys- 

 tem does. 



(b) The cost system includes no more transactions with 

 outside parties than the general system. 



(c) The cost system includes more expenses and incomes 

 within the business, commonly called adjustments, or 

 transfers from one account to another. 



The general system, therefore, is sufficient if one wishes 

 to find his profit as a farmer, as distinct from his profit as 

 an individual ; and to find the amounts of the expenses and 

 of the sales of various commodities represented by trans- 

 actions with outsiders. The general system of accounting 

 is not sufficient if one wisties to find the profit from each 

 branch of his farming operations, after considering all ex- 

 penses of production and maintenance and all incomes re- 

 sulting from the consumption of the productive elements 

 on the farm, as well as from sales. 



The showing of such detailed profits requires the keeping 

 of cost records to collect the data. The matter of collect- 

 ing the data is a very important one in accounting. 



Under the general system*, data collection is carried on 

 more or less automatically. Some commodities are bought 

 and a bill is received showing the nature and value. This 

 bill is used as a basis for making the check or currency 

 payment and the cash entry. A lease is signed. This forms 

 the basis for making a check or note and the corresponding 

 entries for rent. A contract is made with the hired man. 



