Cost accounting - Cost center accounting

Cost center accounting represents the second stage of managerial accounting. Learn from our article how to carry out cost center accounting step by step.

Function and Structure of Cost Type Accounting

Direct costs (e.g., wood in furniture manufacturing) can be assigned directly to a cost object (product or service) according to the definition. Indirect costs (e.g., rent of the production building), on the other hand, can only be allocated to cost objects through cost center accounting.

Thus, cost center accounting is integrated between cost type accounting and cost object accounting, and answers the question of where and for which services the indirect costs have occurred. Its central function is to allocate the indirect costs to the places of origin (cost centers) – thus attributing them in a causally appropriate manner. As a result of the distribution, indirect cost overhead rates can be calculated, which are then charged to the individual cost objects within the framework of cost object accounting.

However, cost center accounting is not only used for calculating the costs of individual products and services, but can also be used for managing and controlling cost centers by illustrating their costs over time or in comparison with other cost centers.

Implementation of Cost Accounting‍