Cost accounting

1) Introduction:

Cost accounting can be defined as “the establishment of budgets, standards costs and actual costs of operation, processes , activities or products and the analysis of variances , profitability or the social use of funds”.

The evolution of cost accounting took place because of industrial development and limitation of financial accounting does not serve various needs of buiosness thus to fill up the gap cost accounting was evolved .Cost accounting ascertains products cost leading to cost control and cost reduction.

2) cost, cost accounting and cost accounting Accountancy(relationship):

Process of ascertain the cost= costing

Process ascertaining cost+ cost control methods and ascertainment of profitability= cost accounting

Process of ascertaining cost+ cost control methods and ascertainment of profitability+ presentation of relevant information for managerial decision making= cost accounting

3) objective of cost accounting:

· The primary objective of cost accounting is to ascertain and analysis cost.

· Various technique are used like standard costing and budgetary control for controlling cost.

· For cost reduction plan and methods are continuously reviewed in order to reduce cost.

· Reliable data is provided to act as base for fixing selling prices.

· In cost accounting periodic statement for review of operating results are prepared.

· It provides useful information for planning and control.

4) Elements of cost:

1) Material =direct expense + indirect expense

2) Labour= direct expense +indirect expense

3) Others expenses= direct expense+ indirect expense

4) Overheads=indirect material expenses+ indirect labour expense + indirect other expense.

Overheads:

Production overheads

Office and admin overheads

Selling overhead

Distribution overhead

Method of costing :

1) Specialized production:

· Batch costing

· Job costing

· Contract costing

2)Standardized production:

· Single costing

· Process costing

· Joint and by product costing

3) Techniques /types of costing:

· Historical costing:
costs are determined after they have incurred .

· Standard costing
standard costing is prepared and used and then accompanied with actual cost to determine the extent of variance .

· Absorption costing :
all cost , fixed and variable are charged to product ,jobs etc

· Uniform costing :

It is not a technique but the organization use similar costing principles.

· Marginal/variable costing=
charge variable cost to cost unit and fixed costs are written of in full against the aggregate contribution .

4) Essential of an ideal costing system:

· It should be simple and easy to operate.

· The data should be accurate.

· It should be cost effective

· Management should have faith in costing system

· The data should be relevant

· There should be participation by the executive

To overcome the practical difficulties faced in the installation of a costing system following system are suggested:

· Support from top management.

· Utility of system to existing staff

· Worker’s confidence for cooperation

· Training to the staff.

· Proper supervision

Thus the cost accounting is the collection and analysis of relevant cost data for interpretation and presentation for various problem of management.

SUBMITTED BY: VIKAS CHOUHAN ,ROLL NO 124

MONICA GUPTA ,ROLL NO-:191