Oddly enough, as a financial concept the term bottom line It has only been around for about forty years or so. Its genesis as a word (an adjective, actually) was the result of the growing need to establish the ultimate benchmark for profitability in the advanced post-WWII corporate economy. That is, to know more than the profits and losses of a company through simple financial accounting. With the complexities introduced through a more mechanized large-scale robotic global economy in the 1950s and 1960s, as well as shareholder mandates for stricter (i.e., realistic) earnings reporting during this time, a new way of evaluating earnings. Was called, cost accounting.

This technique for manufacturers differs from financial accounting in that it is largely a much more formal mechanism by which the costs of products or services are determined and controlled for efficiencies. This is accomplished by gathering all operating costs together and then systematically classifying them to determine their suitability as expenses. With this information, the management is able to make decisions that eliminate inefficiencies in the cost of production and, therefore, improve the bottom line Benefits. Good cost accounting Not only can it help control costs, it can also help in a wide range of manufacturing operations. In this sense, the seven major objectives of cost accounting in manufacturing are:

1. Determination of costs: Of course, the overall goal of cost accounting is to find out how much it costs you to manufacture or provide your products and / or jobs.
2. Control: Improving efficiency by controlling and reducing costs. Controlling the budget through classification and analysis is controlling costs.
3. Information: Knowing the levels of raw material stocks, the work in progress and the quantity of finished products is information provided through cost accounting that can be used immediately by management.
4. Increased efficiency: The efficiency of any operation is only truly measured by the sum of its parts. As chaos shows, inefficiency in one area must eventually cause inefficiency in others. Cost accounting provides an understanding of the level of efficiency (or inefficiency) in all areas of manufacturing operations.
5. Determine the sale price: Through the detailed information provided by good cost accounting, you will be able to know an optimal sale price for your product and / or service under different variables (seasonal, economic, distribution, etc.).
6. Operations manager: Where are your direct and indirect costs being consumed and why? With cost accounting, you can modify operations policies to improve the profitability of the work produced.
7. Finance: Cost accounting it provides the opportunity for frequent reviews of production costs, especially as they correlate with production in relative terms. Again, routine cost accounting Finance helps to make continuous improvement that reduces costs.

A glance at these seven goals quickly tells you that, unlike simple financial accounting, detailed work on cost accounting provides a richer information base for operations management. The collection, classification and determination of costs through accounting then becomes a means by which efficiencies are discovered and implemented. To the extent that these implementations offer a higher return on investment, and perhaps a higher dividend for shareholders, it can be said that this technique really helps to generate bottom line profits.