What is the Cost Center Accounting?

The Cost Center Accounting is based on the cost element accounting and distributes recorded Cost Element Accounting costs to proper cost centers. The implementation of cost center accounting requires that the entire management is divided into appropriate accounting units. This structure is retained in the cost center plan. Analogous to the cost element plan there are no set guidelines for the design of cost center plan. The formation of the cost centers will be based on the structures of the respective municipality. In principle cost centers may be:

• functional criteria (breakdown of cost centers according to the respective activities)
• organizational criteria (breakdown of cost centers for organizations)
• spatial criteria (breakdown of cost centers for various locations) and / or
• billing-related criteria (a work, such as a machine or system forms a cost center)
are formed. The various criteria can also be linked.

An efficient design of Cost Center Accounting requires a non-overlapping division of responsibilities. Cost center accounting can provide initial information on the economics of the responsibilities of the community. In the first, creating a cost center plan might initially a rather rough outlined, which can later be differentiated according to the information needs.

To offset the cost to the cost centers and the internal activity allocation, which is a cost allocation sheet, shall be prepared. This single as well as overheads are mapped. While direct costs to cost objects (products or services) can be directly attributed causation, this is not possible in overhead costs. Therefore, the overhead costs are initially distributed to the cost centers to be fully attributed to the payers.

Since direct costs to cost objects can be directly attributed, no cost center accounting is performed for it needs. You do not need to be listed in the mandatory operational accounting sheet. Nevertheless, it may be useful for the sake of completeness and comprehensive overview of all costs, so-well perform single and overheads. Therefore, the direct costs are presented informative with the proposed model for the overhead allocation sheet.

In overheads is under-secreted between primary and secondary overhead costs. The primary overheads are those overheads that can be directly attributed to the cost centers. The secondary overhead costs arising from the internal activity allocation.

Based on the internal activity allocation, the various performance linkages between cost centers are taken into account. In order to perform the internal cost allocation, cost centers are divided into main and auxiliary cost centers. While service cost centers are only indirectly involved in the preparation of the cost object (eg fleet), the main cost centers are directly creating the payers (eg street cleaning). The service cost centers thus provide services to other cost centers and, ultimately, the main cost centers. The fundamental objective of the internal activity allocation, therefore, is to offset the cost of the service cost centers according to their performance possible causation-to meet the direct cost centers. From the main cost centers, the cost can be offset to the cost object further turn. In this respect, the Cost Center Accounting forms an important link between cost elements and cost-carrier bill.

The internal cost allocation can be performed by means of-various methods. Possible events include the expenses of cultivation method, the ladder method, the iterative method or cost allocation based on transfer pricing. In cost accounting policy no specific method is favored. It is merely pointed out that a suitable offset against-recognition methods should be applied. So it is up to the community to decide well chosen billing method is best suited to the individual situation and cost center structure of the community.
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  3. Good information about Cost Center Accounting. I am finding it much useful. Thanks you did shared with us. Keep discussing such information with us.


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