Module I- (Introduction to costing)
Cost
Cost refers to the total expense incurred on the production and sale
of articles.
Costing
Costing simply refers to the techniques and process of ascertaining
costs.
Cost Accounting
Cost accounting maybe defined as a formal accounting system set up
for recording, analysing and estimating costs.
General principles of cost accounting
A cost should be related to its causes.
A cost should be charged only after it has been incurred.
The convention of prudence should be ignored.
Abnormal costs should be excluded from cost accounts.
Past costs not to be charged to future period.
Principles of double entry should be applied wherever necessary.
Objectives/ Purpose of cost accounting
To ascertain the cost.
To control cost.
To determine selling price.
To measure efficiency.
To control and reduce wastage.
To provide cost data for fixation of selling price.
To ascertain profitability of each product.
To advise management on future expansion policies.
To provide a perpetual inventory of stores and other materials.
Functions of cost accounting
It helps ascertainment of accurate cost of each job, product and
process.
It helps in management in decision making.
It helps in management in formulation of policies.
, It helps in optimum utilization of resources.
It helps in fixing prices of goods or services.
It helps in cost control.
It helps in inter firm and intra firm comparison.
It helps in implementation of incentive wage system.
To provides cost data to government and trade union.
Scope of cost accounting
Cost classification
Cost recording
Cost allocation
Cost ascertainment
Cost comparison
Cost control
Cost audit
Cost reporting
Difference between Financial accounting and Cost accounting
Financial Accounting Cost Accounting
The purpose of financial The purpose of cost accounting
accounting is to keep complete is reducing and controlling cost.
record of the financial
transactions.
These are accounts of whole It is only a part of whole
business. accounts.
Valuation of stock at cost or Valuation of stock at cost price.
market price.
Financial accounting are Cost accounting are concerned
concerned with external with internal transactions.
transactions.
Only historical costs are Both historical and
recorded. predetermined costs are
recorded.
It discloses net profit and loss of It discloses profit and loss of
the business. each product, job or service.
Cost
Cost refers to the total expense incurred on the production and sale
of articles.
Costing
Costing simply refers to the techniques and process of ascertaining
costs.
Cost Accounting
Cost accounting maybe defined as a formal accounting system set up
for recording, analysing and estimating costs.
General principles of cost accounting
A cost should be related to its causes.
A cost should be charged only after it has been incurred.
The convention of prudence should be ignored.
Abnormal costs should be excluded from cost accounts.
Past costs not to be charged to future period.
Principles of double entry should be applied wherever necessary.
Objectives/ Purpose of cost accounting
To ascertain the cost.
To control cost.
To determine selling price.
To measure efficiency.
To control and reduce wastage.
To provide cost data for fixation of selling price.
To ascertain profitability of each product.
To advise management on future expansion policies.
To provide a perpetual inventory of stores and other materials.
Functions of cost accounting
It helps ascertainment of accurate cost of each job, product and
process.
It helps in management in decision making.
It helps in management in formulation of policies.
, It helps in optimum utilization of resources.
It helps in fixing prices of goods or services.
It helps in cost control.
It helps in inter firm and intra firm comparison.
It helps in implementation of incentive wage system.
To provides cost data to government and trade union.
Scope of cost accounting
Cost classification
Cost recording
Cost allocation
Cost ascertainment
Cost comparison
Cost control
Cost audit
Cost reporting
Difference between Financial accounting and Cost accounting
Financial Accounting Cost Accounting
The purpose of financial The purpose of cost accounting
accounting is to keep complete is reducing and controlling cost.
record of the financial
transactions.
These are accounts of whole It is only a part of whole
business. accounts.
Valuation of stock at cost or Valuation of stock at cost price.
market price.
Financial accounting are Cost accounting are concerned
concerned with external with internal transactions.
transactions.
Only historical costs are Both historical and
recorded. predetermined costs are
recorded.
It discloses net profit and loss of It discloses profit and loss of
the business. each product, job or service.
