FULL COST ACCOUNTING Meaning and
Definition
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Full cost accounting is a methodology used to measure and analyze the complete costs of a particular product, service, or project. It takes into consideration not only the direct expenses involved in the production or provision of goods and services, but also the indirect and hidden costs that might otherwise be overlooked, such as environmental impacts or social costs. The goal of full cost accounting is to provide a comprehensive understanding of the true costs associated with an activity, in order to make more informed decisions and promote sustainable practices.
This approach recognizes that traditional accounting methods often fail to capture the entire cost picture, as they typically focus only on the immediate monetary expenses. Full cost accounting goes beyond this narrow view and incorporates both short-term and long-term consequences, including not only financial costs, but also social and environmental impacts.
By incorporating these factors into the analysis, full cost accounting seeks to reveal the true costs and benefits associated with different options or actions. This can allow for more accurate pricing, better evaluation of investments, and improved decision-making. It enables organizations to consider the broader impacts of their activities and helps identify hidden costs that could be mitigated or avoided.
Overall, full cost accounting provides a more comprehensive understanding of the total costs involved in a particular activity, allowing for more effective resource allocation and a more sustainable approach to business and decision-making.
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