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    Cost accounting is the process of recording and analyzing costs to help management make decisions. It involves tracking costs for products, services, processes, orders or other cost objects. The objectives of cost accounting include determining selling prices, measuring efficiency, preparing financial statements, providing a basis for operating decisions, and controlling and reducing costs. Cost accounting provides different and more detailed information than financial accounting to help management.

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    Cost accounting is the process of recording and analyzing costs to help management make decisions. It involves tracking costs for products, services, processes, orders or other cost objects. The objectives of cost accounting include determining selling prices, measuring efficiency, preparing financial statements, providing a basis for operating decisions, and controlling and reducing costs. Cost accounting provides different and more detailed information than financial accounting to help management.

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    Cost accounting is the process of recording and analyzing costs to help management make decisions. It involves tracking costs for products, services, processes, orders or other cost objects. The objectives of cost accounting include determining selling prices, measuring efficiency, preparing financial statements, providing a basis for operating decisions, and controlling and reducing costs. Cost accounting provides different and more detailed information than financial accounting to help management.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    290 views14 pages

    1 5

    Uploaded by

    kunja
    Cost accounting is the process of recording and analyzing costs to help management make decisions. It involves tracking costs for products, services, processes, orders or other cost objects. The objectives of cost accounting include determining selling prices, measuring efficiency, preparing financial statements, providing a basis for operating decisions, and controlling and reducing costs. Cost accounting provides different and more detailed information than financial accounting to help management.

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    of 14

    Cost Accounting

    Cost Accounting is a process of accounting for costs.


    It embraces the accounting procedures relating to
    recording of all income and expenditure and the
    preparation of periodical statements and reports
    with the object of ascertaining and controlling costs.
    It is thus the formal mechanism by means of which
    costs of products or services are ascertained and
    controlled.
    Meaning of costing
    By CIMA London, “ the techniques and
    processes of ascertaining costs”

    The proper allocation of expenditure


    and involves the collection of costs
    for every order, job, process, service
    or unit”.
    Objectives of Cost Accounting
    • Determining selling price

    •Measuring and increasing efficiency

    • Facilitating the preparation of financial and other


    statements

    •Providing basis for operating policy

    • cost control and cost reduction.


    Cost accunting vs. financial Accounting
    Basis Financial Accounting Cost Accounting

    Objectives To provide information to all To provide information to


    management

    Mode of Based on concepts and No policies followed


    presentatio conventions
    n
    Recording Transactions are recorded in Transactions are recorded
    subjective manner in objective manner

    Analysing Reveals the business profit Reveals only product


    profit profit

    Periodicity Yearly reporting Reported as per the


    of reporting requirement of the
    management
    Importance of Cost Accounting
    • Helps in periods of depression & trade
    competition
    • Facilitates price fixation
    • Helps in channelising production on right
    lines
    • Eliminates wastages
    • Provides data for periodical P & L account
    • Helps in inventory control
    • Assists in increasing productivity
    Meaning of Cost
    It is the price paid for something

    Cost is the amount of expenditure


    incurred or attributable to a given
    thing, by CIMA London
    Cost Vs. Expense and
    Loss
    Expense is an expired cost resulting
    from a productive usage of an asset.
    Cost Centre
    According to CIMA London, “a location,
    person or item of equipment(or group
    of these) for which costs may be
    ascertained and used for the purpose
    of control.”
    Cost Unit
    A unit of product or service in relation
    to which costs are ascertained.
    A cost unit goes up a step further by
    breaking up the costs into smaller
    sub-divisions, thereby helping in
    ascertaining the costs of saleable
    products or services
    Elements to cost
    • Material: Direct & indirect
    • Labour : Direct & indirect
    • Expenses : Direct & indirect
    • Overheads : Direct & indirect
    Elements of total cost
    Prime cost
    Factory cost
    Office cost
    Total Cost
    Cost reduction and cost control
    Cost control Cost Reduction
    Aims at maintaining cost in It aims at reducing the cost
    accordance with standard costs

    It seeks to attain the lowest It brings profits by challenging


    possible standard through research

    It is a static function It is dynamic function

    Emphasises on past and present Emphasises on present and future and


    present

    It is preventive function It is corrective function


    Classification of costs
    • Fixed, variable and semi variable
    • Product cost and period cost
    • Direct and indirect cost
    • Relevant and irrelevant costs
    • Shut-down costs and sunk costs
    • Controllable and uncontrollable cost
    • Avoidable and unavoidable costs
    • Out of pocket costs
    • Opportunity costs
    • Traceable, untraceable or common costs
    • Conversion costs
    • Production, selling and office costs
    PROBLEMS IN INSTALLATION OF
    COSTING SYSTEM
    • Lack of support from top management
    • Resistance from existing staff
    • Non cooperation at other levels
    • Shortage of trained staff
    • Heavy costs

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