ECONOMICS

Detailed explanation-1: -Cost accounting is used internally by management in order to make fully informed business decisions.

Detailed explanation-2: -Unlike financial accounting, which focuses on preparing statements for company shareholders and interested parties outside of the company, cost accounting is internal. Company management and leaders use cost accounting to inform their decisions on how to improve the company’s operations.

Detailed explanation-3: -Examples of internal users are owners, managers, and employees. External users are people outside the business entity (organization) who use accounting information. Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.

Detailed explanation-4: -Cost accounting is especially important for businesses that manufacture and sell at scale and/or have diverse product lines, as these companies have many costs associated with manufacturing, packaging, and distributing their goods.

Detailed explanation-5: -They need detailed performance information about each segment of the business, so that they can make ongoing corrections and enhancements to the organization. Their objectives are to maintain a steady or increasing level of cash flow, while also maintaining a prudent level of debt risk.