What is an interlocking costing system?

An interlocking costing system is an accounting method that integrates both financial and cost accounting records, allowing businesses to track costs and revenue simultaneously. This system facilitates the accurate allocation of costs to specific products or services while maintaining a comprehensive view of overall financial performance. By interlinking these accounts, organizations can enhance decision-making and improve efficiency in resource management. It is particularly useful for businesses with diverse product lines or services that require detailed cost analysis.