Cost Accounting: Profit and Loss Calculation

Companies do not only need to know the costs of different products, but they also need to know whether they gain a profit or realize a loss. We explain how companies use cost information to calculate their profit and assess their profitability. Depending on how companies account for changes in inventories, we distinguish "absorption costing" and "variable costing". In addition, some companies structure their income statement according to the "nature of expense method", while others structure it

• Learn different methods for preparing income statements
• Explain reasons for profitability differences across methods
• Choose the best method for specific decision contexts