Cost accounting provides product cost information to both external parties for investment and credit decisions and to internal managers for planning, controlling, decision making, and performance evaluation. It involves collecting, classifying, and allocating costs and determining the cost of products, activities, and services. Cost accounting also covers cost control through techniques like budgeting and standard costing to increase efficiency and maximize profits.
Cost accounting provides product cost information to both external parties for investment and credit decisions and to internal managers for planning, controlling, decision making, and performance evaluation. It involves collecting, classifying, and allocating costs and determining the cost of products, activities, and services. Cost accounting also covers cost control through techniques like budgeting and standard costing to increase efficiency and maximize profits.
Cost accounting provides product cost information to both external parties for investment and credit decisions and to internal managers for planning, controlling, decision making, and performance evaluation. It involves collecting, classifying, and allocating costs and determining the cost of products, activities, and services. Cost accounting also covers cost control through techniques like budgeting and standard costing to increase efficiency and maximize profits.
Cost accounting provides product cost information to both external parties for investment and credit decisions and to internal managers for planning, controlling, decision making, and performance evaluation. It involves collecting, classifying, and allocating costs and determining the cost of products, activities, and services. Cost accounting also covers cost control through techniques like budgeting and standard costing to increase efficiency and maximize profits.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 6
Introduction to Cost Accounting
Cost accounting A discipline that addresses the demands of both financial and management accounting by providing product cost information to: (1) external parties for investment and credit decisions - stockholders, creditors, and various regulatory bodies (2) internal managers who are responsible for planning, controlling, decision making, and evaluation of performance
Scope Of Cost Accounting
Major functional activities: 1. Costing The main objective of costing is to determine the cost of products, activities, or services. It involves the collection and classification of costs according to various elements and proper allocation of the expenses to the product or activity.
2. Cost control Cost control covers the analysis of the costs to determine whether the current level of costs is satisfactory in light of the predetermined levels or standards. Cost is managed using a variety of techniques in order to increase the operating efficiency and maximize the profit earning capacity of the business.
3. Budgeting Budgeting relates to the establishment of a comprehensive plan of operations expressed in financial terms. While budget preparation is generally used in planning the operations or activities, it is also used for control. Objectives Of Cost Accounting To ascertain the cost. Cost accounting involves the collection, classification, and allocation of expenses between manufacturing and non-manufacturing activities. The cost of goods manufactured is ascertained through various costing techniques such as actual or historical costing, standard costing, and normal costing.
To determine the selling price.
Cost accounting provides necessary information about the cost of a product as well as the cost incurred at every stage of production. The cost of a product is an important factor in deciding its selling price. Although other factors are taken into consideration such as the condition of the market, area of distribution or volume of sales, the cost of a product plays a major role in fixing the selling price.
To control cost. Cost accounting helps management to control costs through various techniques such as budgetary control, standard costing and inventory management control. These techniques enable management to determine the operating efficiency of the business.
To facilitate the preparation of financial statements and other reports.
Cost accounting provides timely information necessary for the preparation of the financial statements and other reports. In order to manage the business and determine its overall operating efficiency, it is essential for management to review the cost data relating to procurement, production, sales, and operating results of the business. Financial statements are generally prepared once a year since the value of actual closing inventories is usually available at the end of the year. However, because cost accounting provides a production report and value of closing stock periodically, it helps in the preparation of the financial statements at shorter intervals.
To provide information for decision-making.
Cost accounting provides information for managerial decisions in formulating business policies such as make or buy decision, whether to close or continue the operation at a loss, determining cost-volume-profit relationship, etc.
Relationship Between Cost
Accounting And Financial Accounting Financial Accounting
CA deals with reco
FA deals with recording, classifying, summarizing, and interpreting the m NATURE interpreting, in monetary terms, the transactions and events incurred in manuf carried out by an organization. activity, or service CA leads to the de FA leads to the preparation of the major financial statements in activity, or service OBJECTIVE accordance with PFRS. It aims to provide financial information product, activity o mainly to external users. provide informatio control and decisi External users such as creditors, shareholders, banks, and PRIMARY USERS Internal users such government. The double-entry system is used for recording, classifying, and ACCOUNTING SYSTEM May not be based summarizing transactions and events. No specific accoun ACCOUNTING PFRS are followed in recording, measuring, and presenting the information is ma PRINCIPLES financial information. planning and cont FA covers all transactions of the business that affect the CA covers all trans SCOPE OF TRANSACTION preparation and presentation of financial statements. activity, or service CA uses monetary FA relates to past transactions and events that are measurable in useful in particula UNIT OF MEASURE terms of money. It is generally based on historical cost hours, units produ convention. estimates and pro Cost data provides Financial statements and reports are generally prepared for a However, no spec TIME PERIOD period of one year, but can also be prepared at regular intervals accounting report such as semiannually or quarterly. for purposes of pl decision-making Relationship Between Cost Accounting And Management Accounting Management accounting deals with the collection, analysis, and interpretation of information to assist management in their decision-making and to conduct the business more effectively and efficiently. In addition to financial and cost data, additional information is also obtained such as sales data, price, product demands, physical quantities, and capacities.
Cost accounting is specific about determination, ascertainment, and control of costs, while the scope of management accounting is much broader as it encompasses all functions of management. Cost accounting supplements management accounting function as it provides necessary financial and non-financial data to management. Hence, cost accounting is considered as a subset of management accounting.
On the other hand, management accounting and financial accounting are different in several ways. Management accounting is concerned about providing financial and nonfinancial information to internal users in order to manage the business effectively and efficiently and to perform key business decisions and policies. On the other hand, financial accounting is concerned about providing financial information to external users to meet their needs.
Components of Cost Accounting
Comparison of Financial, Management, and Cost Accounting Cost Accounting Cost accounting information addresses the demands of both financial and management accounting and is thus represented as the intersection of the financial and management accounting systems.
supports the financial accounting system by providing product cost and service cost information to external parties o product cost as the sum of the costs incurred within the factory to make one unit of product o service cost is the sum of the direct costs incurred within a non-manufacturing company or nonprofit organization to provide a given service
supports the management accounting system by providing product and service cost information to internal managers who are responsible for planning, controlling, decision making, and evaluating performance o for internal reporting purposes, product and service cost information can be developed outside the constraints of GAAP to assist management with specific needs
(Cultural Encounters in Late Antiquity and the Middle Ages, 41) Ildikó Csepregi - Incubation in Early Byzantium_ The Formation of Christian Incubation Cults and Miracle Collections-Brepols (2024)
(Cultural Encounters in Late Antiquity and the Middle Ages, 41) Ildikó Csepregi - Incubation in Early Byzantium_ The Formation of Christian Incubation Cults and Miracle Collections-Brepols (2024)
