Job-Order CostingTypes of Accounting Costing Systems
Job-order costing is one of many different accounting costing systems. Finding the right system for a business is key to monitoring and controlling costs.
There are many different types of costing systems that management and cost accountants may come across. Each of these costing systems may handle certain entries in a different way. One type of costing system that is popular in certain industries is called job-order costing. Job-order costing can be used in some circumstances where other types of costing such as process costing or normal costing would not be as effective. What Is Job-Order Costing?Job-order costing is a cost system that is used to accumulate costs by jobs. These jobs could also be called batches, as each job is generally a “batch” of similar products. Each batch should be individualized in some way to make it differentiated from other batches for it to be a separate job. If batches were all identical, another type of costing would be more appropriate. The Job-Order Costing ProcessWhen a company operates using job-order costing, a specific set of events will usually occur with each job. Generally, the process is as follows:
When Is Job-Order Costing Appropriate?Job-order costing is a type of costing that can be used in many different industries, although not all. Industries that sell items in batches will be able to use job-order costing most effectively. For example, a T-shirt company that makes batches of T-shirts with company logos on them may use job-order costing, each company they work for could be classified as an individual job. Job-order costing would probably not be used in other industries such as general manufacturing, as products may not be specialized and therefore would not be classified in batches. Related Articles:
The copyright of the article Job-Order Costing in Accounting is owned by Tiffany Bradford. Permission to republish Job-Order Costing in print or online must be granted by the author in writing.
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