2. Meaning & Definition Cost- “ the amount of expenditure (actual or notional) incurred on, or attributable to a specified thing or activity”-CIMA, London Costing-”the techniques and processes of ascertaining cost”-CIMA, London
3. Cost Accounting “Cost Accounting is the application of accounting and costing principles, methods and techniques in the ascertainment of costs and the analysis of savings and/or excesses as compared with previous experience or with standards”-CIMA, London
4. “ 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 presentation of information for the purpose of managerial decision-making”-CIMA, London Cost Accountancy
5. Cost Ascertainment Cost Evaluation Cost Control Cost Reduction Price Fixing Data for Decision-making: level of output. Product –mix, profitability of products and processes, comparative cost schedules Objectives of Cost Accounting
6. Limitations of Financial Accounting Historical Unclassified Whole Organisation No Material Control No Wage Control No Overheads Control No Normalcy Approach No Cost Evaluation Price Fixation difficult No Cost Reduction Tenders & Quotations Data for Reporting Elimination of loss Manipulation No Comparison
7. Cost Accounting Financial Accounting External Reporting Annual Reporting Historical Objective Information Wholesome Approach Compulsory Rigid Preparation Accurate Independent Audit Internal Reporting Periodic Reporting Historical/Prospective Subjective Divisional Voluntary Flexibility Approximation dependant No Audit Differences Between Financial Accounting & Cost Accounting
8. Advantages of Cost Accounting Efficient Management of Resources Elimination of Wastages Cost Control Facilitating Price Fixation Helping Decision-making Preparation of Budgets Profit Planning
9. Fair Wages Recognition of Efficiency Incentive System of Payment Cordial Relation Higher Share of Profit Advantages to Workers
10. Advantages to the Government Resolving Tax Disputes Policy Framing Planning Price Control Measuring Efficiency Quantum of Subsidy
11. Where the Objective is cost ascertainment: Process Costing: Unit Costing, Operating Costing, and Operation Costing Job Costing: Job Costing, Batch Costing and Contract Costing Methods of Costing
12. Where the objective is cost evaluation: Standard Costing Historical Costing Systems of Costing:
13. Where the objective is cost control and cost reduction: Marginal costing Absorption Costing Techniques of Costing
