Cost Center and Cost Object Accounting

Cost center accounting assigns costs to the departments where they arise, cost object accounting assigns them to the products or services they arise for.

Cost Center and Cost Object Accounting: Not to be confused with

Cost center and cost object accounting is NOT the same as bookkeeping by expense account. Cost centers and cost objects are an additional management-accounting layer, independent of the legally required bookkeeping accounts.

Cost center accounting answers where in the company costs arise, for example in production, sales or administration, cost object accounting answers what they arise for, for example a specific product or job (Source 1). Together they form the basis for internal costing and budgeting, independent of financial accounting by expense account.

This layer of reporting matters especially for organisations with several service areas, for example in Healthcare, for Energy & Utilities or in Education.

Sources for Cost Center and Cost Object Accounting

1. Wikipedia, "Cost centre" ↗