Profit maximization, i.e. the difference between sales revenues and costs, is the most important aspect of any business. This paper focuses on the importance of costs and cost management as a precondition for achieving success in business operations. In order to ensure quality cost management, the cost accounting method to be applied must be chosen carefully. This paper analyzes the efficiency of traditional methods compared to the contemporary ABC method. The traditional cost accounting approach rests on the simple operation of division, where the most dominant costs are the cost of direct labor and the cost of direct material, while indirect costs account for a relatively small share of total production costs. In companies recording larger shares of indirect costs in total costs, this approach might give an inaccurate and unrealistic picture. In modern conditions of production and provision of services, globalization, market segmentation and emergence of new technologies, the number of companies recording larger shares of indirect costs is constantly growing. The ABC (Activity Based Costing) cost accounting method has been created as an answer to the problems experienced in using traditional methods. It gives a more objective picture of indirect cost distribution, i.e. it strives to ensure that the costs are distributed among their respective owners as precisely as possible. It therefore provides much better cost information, used by the management at various decision making levels, compared to traditional methods.