Oddly enough, as a financial concept the term bottom line it’s only been around for about forty years or so. Its genesis as a word (an adjective, really) was the result of a growing need to set the ultimate benchmark for profitability in the advanced post-World War II corporate economy. That is, knowing more than the profit and loss of a company through simple financial accounting. With the complexities introduced through a large-scale, more mechanized robotic global economy in the 1950s and 1960s, as well as shareholder mandates for more stringent (i.e., realistic) earnings reporting during this time, a new way of evaluating earnings. Was called, cost accounting.

This technique for manufacturers differs from financial accounting in that it is largely a much more formal mechanism by which the costs of products or services are determined and controlled to achieve efficiencies. This is accomplished by bringing together all operating costs and then systematically classifying them to determine their eligibility as expenses. With this information, management can make decisions that eliminate inefficiencies in the cost of production and thus improve the bottom line earnings good cost accounting not only can it help control costs, but it can also help in a wide range of manufacturing operations. In this sense, the seven main objectives of cost accounting in manufacturing are:

1. Costing: Of course, the general objective of cost accounting is to find out how much it cost you to make or provide your products and/or jobs.
2. control: Improve efficiency by controlling and reducing costs. Controlling the budget through classification and analysis is controlling costs.
3. Information: Knowing the stock levels of raw materials, work in progress, and the quantity of finished goods is information provided through cost accounting that management can immediately use.
4. Increased efficiency: The effectiveness of any operation can only truly be measured by the sum of its parts. As chaos shows, inefficiency in one area will eventually cause inefficiency in others. cost accounting provides an understanding of the level of efficiency (or inefficiency) in all areas of manufacturing operations.
5. Determine the selling price: Through the detailed information provided by good cost accountingYou will be able to find out the optimal sale price for your product and/or service under different variables (seasonal, economic, distribution, etc.).
6. Head of Operations: Where are your direct and indirect costs consumed and why? With cost accountingYou can adjust operations policies to improve the profitability of the work produced.
7. finance: cost accounting provides the opportunity for frequent revisions of production costs, especially since they correlate with production in relative terms. Again the routine cost accounting Finance helps to make continuous improvement that reduces costs.

A glance at these seven objectives quickly tells you that, unlike simple financial accounting, the detailed work of cost accounting provides a richer information base for operations management. The collection, classification and determination of costs through accounting then becomes a means by which efficiencies are discovered and implemented. To the extent that these implementations offer a higher return on investment, and perhaps a higher dividend for shareholders, it can be said that this technique really helps generate bottom line profits.