Cost Accounting Checklist

Export the cost-side trial balance from QuickBooks, NetSuite, or Sage Intacct for the close period. Tie the export to the GL control totals before classification work begins — a mismatched export here propagates into every downstream allocation.

Direct costs trace to a specific cost object (job, product, customer); indirect costs do not. Common gotcha: production supervisor wages are usually indirect even when payroll is coded to a department, because the supervisor covers multiple jobs.

Behavior tagging drives the flexible budget later in this workflow. Utilities and maintenance are typically mixed — split the fixed and variable components using the high-low method or regression on prior 12 months.

Strip out interest, gain/loss on disposal, restructuring charges, and non-recurring items before allocation. Folding these into product cost distorts margin analysis and standard-cost variances.

Use job tickets, BOM consumption, and labor time entries to assign direct material and direct labor to the correct job, work order, or product. In QBO this typically means class or project tagging; in NetSuite, subsidiary and segment dimensions.

Pick a basis that reflects actual resource consumption: machine hours for equipment depreciation, square footage for facilities, headcount for HR overhead. Document the basis and rationale in the costing-model workpaper.

Run the apportionment journal: debit cost objects, credit overhead clearing. Confirm overhead clearing zeros out — a residual balance signals an allocation gap that will trip up downstream variance analysis.

Capacity, product mix, and automation levels shift over time; an allocation basis set three years ago may no longer reflect how resources are consumed. Review at least annually, and any time a major capex or process change goes live.

Replace stale bases in the costing-model workpaper, version-control the change, and rerun apportionment for the current period using the new bases. Note the basis change in the management commentary so reviewers can trace the year-over-year shift.

Flex the variable cost lines to the period's actual production volume; hold fixed costs at the static budget. Comparing actuals to a static budget when volume changes will overstate or understate variances and mislead management.

Decompose total variance into price (rate) and quantity (efficiency) for material, labor, and variable overhead. Apply the firm's materiality threshold — typically 5% of standard cost or a dollar floor — to flag variances that need investigation.

For each flagged variance, document root cause (price spike, scrap, rework, capacity absorption, accounting error) and corrective action owner. Do not close the period with material variances unexplained — partner review will block sign-off.

Roll variance learnings into the rolling forecast in Fathom or Vena. Persistent unfavorable price variances on raw material may signal that the standard cost itself needs to be reset at the next standard-cost review.

Pull the responsibility-accounting report for each cost center and compare actuals to the flexible budget. The cost-center owner — not the accountant — is accountable for explaining the variance.

Identify cost centers with unfavorable variance over the firm tolerance (commonly 10% or $25K, whichever is greater). Loop in the department head with a written variance memo before the management review meeting.

Capture process-improvement candidates surfaced during variance review: scrap reduction, layout changes, automation, SKU rationalization. Quantify the expected annualized savings so leadership can prioritize.

Pull spend by vendor and flag suppliers where contracted rates haven't been benchmarked in 12+ months. Coordinate with procurement before reaching out — uncoordinated price calls undermine existing negotiations.

Apply FIFO, LIFO, or weighted-average consistent with the documented accounting policy. Method changes require disclosure and IRS Form 3115 if filed for tax. Confirm the standard-cost roll has been refreshed for the current period.

Cycle count A-items monthly, B-items quarterly, C-items annually under ABC inventory classification. For year-end, perform a full wall-to-wall count with auditor observation if attest engagement is in scope.

Identify SKUs with count-vs-system variances and recount before posting any adjustment. Document the cause (miscount, mispick, scrap not relieved, theft) — auditors will ask for the variance log at year-end.

Apply the firm's obsolescence reserve policy (e.g., 50% reserve on items with no movement for 12 months, 100% for 24+ months). Write inventory down to lower of cost or net realizable value per ASC 330; keep the supporting workpaper for audit PBC.

Generate the cost-of-goods-manufactured statement, gross-margin-by-product report, and variance summary. Tie totals back to the closed trial balance — a $1 break here means the package isn't ready to send.

For pools where traditional volume-based allocation distorts product cost (e.g., setups, inspections, customer service), run the ABC overlay using cost-driver rates. Highlight any product where ABC cost differs from standard cost by more than 10%.

Send the compiled package — variance commentary, margin report, ABC analysis, inventory roll-forward — to the CFO and operations leadership. Capture controller sign-off below before the period closes.