Job Cost Accounting – Its Relevance and Importance

By Fayaz Ali Shahabudeen

Most companies invest a lot of time and energy into the process of job cost  accounting. To the lay person, this may seem like a lot of undue attention, but  it is an important function which does estimate the performance of the company  in relation with its expenses and revenue.

Job cost accounting takes into consideration various jobs in the  organisation, and studies the expenses which have been incurred by the function  against the revenues it has been able to generate.

There are several parameters that come clear with the use of job cost  accounting. The first helps ensure that there is a certain level of  profitability which is maintained in each function of the organisation. This  also helps understand which the weakest link is, and helps take more specific  remedial action.

Another important aspect of job cost accounting is being able to correlate  targeted revenue against the actual revenue, and similarly, estimated costs  against actuals.

Job cost accounting actually begins by studying the job and being able to  monitor all the costs which are associated with a particular job. It then tries  to collect all invoices and make sure that they are forwarded to the customer in  a comprehensive manner. Further, they also need to document and establish how  the revenues justify the costs which have been incurred.

To be able to collate an accurate record, you must be extremely meticulous  and track every record. Make sure that expenses and revenues match and ensure  all invoices have been presented properly. Rather than using vague, general  terms which could end up confusing later, make sure you use precise terms when  making any entries.

Job cost accounting may seem like a laborious, complex affair, but it is  extremely critical to the organisation as it charts progress at every stage and  sets direction for future action.

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