Cost Accounting
Cost Accounting
accounting
Meanings:
Accounting for determination and control of
costs. Financial accounting
Cost Accounting = Costing + Cost Reporting + The format are governed by law and
Cost Control. accounting standards established by
the professional accounting policies
Cost accounting
CA is a formal system of accounting for
costs in the books of accounts by Is concerned with internal users of
means of which costs of products and accounting information, such as
services are ascertained and operation managers
controlled. The generated reports are specific to
Cost means the amount of expenditure the requirement of the management
( actual or notional) incurred on, or The reporting can be in any format
attributable to, a given thing. which suits the user
Cost ascertainment is computation of Management accounting
actual costs incurred
Comprises all cost accounting functions
Cost estimation is a process of
predetermining costs of goods and The accounting for product and service
service. costs, management accounting extends
to use various internal accounting
reports for planning, control and
OBJECTIVES OF COST ACCOUNTING decision making
3. Verifiability
versus relevance
Emphasis on
verifiability
Emphasis on relevance
for planning and control Cost unit
4. Precision versus Emphasis on Emphasis on
timeliness precision timeliness Cost centre
5. Subject Primary focus is on Focuses on segments
the whole organization of an organization
Cost object
Cost accounting
vs. It is an activity or item or operation for
Management accounting which a separate measurement of
costs is desired
Cost
Cost Unit
Types:
Responsibility centre
Function
Direct Costs and Indirect Costs
Direct & indirect
Direct costs
Variability
Costs that can be
Controllability easily and conveniently traced to a unit
of product or other cost objective.
Normality
Examples: direct material and direct
Financial accounting classification
labor
Time
Controllable costs
Uncontrollable costs
Historical costs
How a cost will react to changes in the level of ON THE BASIS OF PLANNING AND CONTROL:
business activity.
Budgeted costs
Total variable costs change
Standard costs
when activity changes.
*Cost accounting – Arora TB
Total fixed costs remain
unchanged when activity
changes.
ON THE BASIS OF MANAGERIAL DECISION
Total Variable Cost MAKING - *Cost accounting – Arora TB
Your total long distance telephone bill is based Marginal costs
on how many minutes you talk.
Out of pocket costs
Sunk costs
Variable Cost Per Unit
Imputed costs
The cost per long distance minute talked is
constant. For example, 10 cents per minute. Opportunity costs
Replacement costs
Differential costs
Fixed Cost Per Unit
Cost accumulation
OR
= Direct materials +
Conversion cost