Environmental Management Accounting Procedures and Principles

Environmental Management Accounting
Procedures and Principles
6. ONE STEP FURTHER DOWN – PROCESS FLOW CHARTS AND COST
ACCOUNTING
6.1. Cost accounting basics
There is a continuous exchange of data and information evaluation between financial
accounting, cost accounting, budgeting and statistics. Aside from this information and data
exchange, cost accounting has the following main objectives:
• Identification of price floors and ceilings;
• Calculation of planned and past production costs;
• Evaluation of internal services, finished and unfinished products for sales or tax purposes;
• Improving economic efficiency;
• Providing basic data for company policy and decision-making;
• Short-term performance evaluation;
• Operating comparisons.
Cost accounting is clearly distinguished from financial accounting by its calculating
procedures. Its primary objectives are realistic cost assessment, cost projections and
planning, and controlling and monitoring of company processes.
When trying to assess environmental costs, one will find that not every company does cost
accounting. More often, especially small and medium-ized companies (SMEs), work with data
from the profit and loss account. It is up to management to decide whether the company
should use cost accounting, and if so, which system it should use and how it should be
designed. In contrast to financial accounting, this decision is not influenced by tax and
commercial law.
Important terms:
• Fixed Costs are costs independent of employment and production volume, such as rent,
interest on bank loans, etc.
• Variable Costs are directly related to production volume, e.g., raw materials and
production labour hours.
• Individual Costs are directly attributed to the corresponding cost centres (process steps)
and cost carriers (products). They include at a minimum raw materials and production
wages.
• Overhead Costs are costs that cannot be directly attributed (true overhead) or costs that
are not directly attributed for reasons of economic efficiency (untrue overhead), e.g.,
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