ABSTRACT
This chapter examines the costing system used in China and its similarities and differences with that of western countries. The current Chinese cost accounting system originated from the Soviet Union. In the early 1950s, when China was under Russian political and economic influence, the Soviet cost accounting system was introduced. In China the objective of cost accounting is to monitor and report fund movements. This concept originated in the planned economy under which enterprises had to report all funds sources and applications, and systematically calculated the money to be returned to the government. Cost accounting has been regulated by the governmental authorities, specially the Ministry of Finance (MOF) in China. The chapter focuses on the accumulation and allocation of deferred or prepaid expenses, auxiliary department expenses and factory overheads. Chinese cost accounting methods can be classified into two groups which are similar to the western concepts of job-order costing and process costing.
