Page 171 - Plant design and economics for chemical engineers

COST AND ASSET ACCOUNTING 145

LEDGER
Cash 112

Date Dare
19- Analysis F Debit 19- Analysis F Credit
I I
April 1 Balance J-l April 3 Salaries
forward 4 Rent
5 Sales J-l 10 Purchases
10 Sales 5-2 12 Insurance
1 1 R Company J-2 13 Taxes
1 1 Sales 5-2 17 Salaries
12 Sales J-2 21 Purchases
18 S Company 3-3 29 Office
22 Sales 5-3 supplies
28 Sales 3-3 30 Purchases
29 Sales 5-3
30 Sales Balance
Total Total
Balance
forward

FIGURE 5-5
Typical ledger sheet that has been closed and balanced.

between journal records and balance sheets, income statements, and general
cost records.

COST ACCOUNTING METHODS
In the simplest form, cost accounting is the determination and analysis of the
cost of producing a product or rendering a service. This is exactly what the
designer engineer does when estimating costs for a particular plant or process,
and cost estimation is one type of cost accounting.
Accountants in industrial plants maintain records on actual expenditures
for labor, materials, power, etc., and the maintenance and interpretation of
these records is known as actual or post-mortem cost accounting. From these
data, it is possible to make accurate predictions of the future cost of the
particular plant or process. These predictions are very valuable for determining
future capital requirements and income, and represent an important type of
cost accounting known as standard cost accounting. Deviations of standard costs
from actual costs are designated as variances.
There are many different types of systems used for reporting costs, but all
the systems employ some method for classifying the various expenses. One
common type of classification corresponds to that presented in Chap. 6 (Cost
Estimation). The total cost is divided into the basic groups of manufacturing
costs and general expenses. These are further subdivided, with administrative,