Cost Accounting

COST ACCOUNTING DEFINITIONS 1. Costing : “Technique & process of ascertaining costs.” 2. Cost Accounting : “Process of accounting for cost for ascertaining & controlling costs.” 3. Cost Accountancy : “Application of costing & cost accounting principles, methods & techniques for cost control & to ascertain profitability.” OBJECTIVES OF COST ACCOUNTING –  Ascertainment of cost  Determination of selling price  Cost control & cost reduction  Ascertaining profit  Managerial decision making.

COST ACCOUNTING  1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

COST CONCEPTS & TERMS Direct costs Indirect costs Standard cost Marginal cost Differential cost Imputed costs Capitalized cost Opportunity cost Out of pocket cost Shut down cost Sunk cost Relevant costs Period costs Explicit costs Implicit costs Cost allocation Cost absorption

COST ACCOUNTING EVOLUTION OF COST ACCOUNTINGPhases of Evolution : A) Prior to Industrial Revolution B) Advent of Industrial Revolution C) World War I & II  VARIOUS REPORTS PROVIDED BY COST ACCOUNTING DEPARTMENT :a) Cost sheets b) Material consumption statements c) Labour utilization statements d) Overheads comparision & justification statements e) Sales details f) Reconciliation of profits g) Inventory cost h) Labour turnover i) Research & development expenditure & comparision 

COST ACCOUNTING IMPORTANCE OF COST ACCOUNTING TO BUSINESS1. 2. 3. 4. 5. 6. 7. 8.

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Control of material cost Control of labour cost Control of overheads Measuring efficiency Budgeting Price determination Curtailment of cost Decision making ADVANTAGES OF COST ACCOUNTING SYSTEM ESSENTIALS OF A GOOD COST ACCOUNTING SYSTEM

COST ACCOUNTING 

ELEMENTS OF COST-

ELEMENTS OF COST

MATERIAL COST

DIRECT   1. 2. 3. 4.

INDIRECT

LABOUR COST

DIRECT

INDIRECT

OTHER EXPENSES

DIRECT

Indirect costs can be termed as overheads. Four main types of overheads are : Production overhead Administration overhead Selling overhead Distribution overheads

INDIRECT

COST ACCOUNTING CLASSIFICATION OF COSTS1. BY NATURE:- material, labour, other 2. BY FUNCTION:- production, selling, distribution, administrative, research, development, pre production, conversion 3. BY VARIABILITY:- fixed, variable, semi variable 4. BY CONTROLLABILITY:- controllable, uncontrollable 5. BY NORMALITY:- normal, abnormal

COST ACCOUNTING TYPES OF COSTING :  Uniform  Marginal  Standard  Historical  Direct  Absorption METHODS OF COSTING :  Job  Batch  Contract  Single / Output  Process  Operating  Multiple

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