Cost accounting is a branch of accounting that focuses on capturing, analyzing, and controlling a company’s costs related to production, operations, or services. Its primary purpose is to help businesses understand the true cost of producing goods or delivering services, enabling better decision-making, budgeting, and financial planning.

Unlike financial accounting, which is aimed at external reporting, cost accounting is mainly used internally by managers to improve operational efficiency and profitability. It involves tracking both fixed costs (like rent and salaries) and variable costs (like raw materials and utilities), and assigning them to specific products, departments, or projects.

Common methods in cost accounting include standard costing, activity-based costing, job order costing, and process costing. These methods help determine unit costs, evaluate performance, and identify areas where the business can reduce waste or improve resource allocation.

For example, by analyzing the cost per unit of a product, a company can decide whether to adjust pricing, change suppliers, or streamline production. Accurate cost data also supports strategic decisions like expanding product lines or entering new markets.

In essence, cost accounting provides valuable insights that help companies maintain profitability, remain competitive, and achieve long-term growth. It is especially important in manufacturing, retail, and service-based industries.