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    Unit 1

    Uploaded by

    Abhishek Upadhaya
    Cost Accounting - Basics

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Unit 1

    Uploaded by

    Abhishek Upadhaya
    9 views7 pages
    Cost Accounting - Basics

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    © © All Rights Reserved

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    Cost Accounting - Basics

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    9 views7 pages

    Unit 1

    Uploaded by

    Abhishek Upadhaya
    Cost Accounting - Basics

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    1) Meaning and Definition

    a) Cost - Cost is the amount of resource given up in exchange of some goods or services. It can be
    defined as the amount of expenditure (actual or notional) incurred on or attributable to a specified
    article, product or activity.

    b) Costing- Costing is defined as “the technique and process of ascertaining costs”.

    c) Cost Accounting - This is a process of accounting for cost which begins with the recording of
    expenditure and ends with the preparation of periodical statement and reports for ascertaining and
    controlling cost.

    d) Cost Accountancy - Cost Accountancy has been defined as “the application of costing and cost
    accounting principles, methods and techniques to the science, art and practice of cost control and
    the ascertainment of profitability. It includes the presentation of information derived there from for
    the purpose of managerial decision making.”

    2) Objectives of Cost Accounting


    Difference between Cost Control and Cost Reduction
    3) Scope of Cost Accounting
    4) Cost Objects
    5) Cost Units

    6) Responsibility Centres
    (i) Cost Centres: The responsibility centre which is held accountable for incurrence of costs which
    are under its control. The performance of this responsibility centre is measured against pre-
    determined standards or budgets.

    (ii) Revenue Centres: The responsibility centres which are accountable for generation of revenue for
    the entity. Sales Department for example, is responsible for achievement of sales target and revenue
    generation. Though, revenue centres do not have control on expenditures it incurs but sometimes
    expenditures related with selling activities like commission to sales person etc. are incurred by
    revenue centres.

    (iii) Profit Centres: These are the responsibility centres which have both responsibility of generation
    of revenue and incurrence of expenditures. Since, managers of profit centres are accountable for
    both costs as well as revenue, profitability is the basis for measurement of performance of these
    responsibility centres. Examples of profit centres are decentralised branches of an organisation.

    (iv) Investment Centres: These are the responsibility centres which are not only responsible for
    profitability but also have the authority to make capital investment decisions. The performance of
    these responsibility centres are measured on the basis of Return on Investment (ROI) besides profit.
    Examples of investment centres are Maharatna, Navratna and Miniratna companies of Public Sector
    Undertakings of Central Government.

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