Objectives 7. Cost accountancy is a wide term which includes several subjects such as costing, cost accounting, cost control, budgetary control and cost audit. commercial activities, still cost accounting has made a place for itself as companies have come to realize that calculation and control over the cost is necessary. The management should know where economies may be sought, waste eliminated and efficiency increased. Helps in estimate – Adequate costing records provide a reliable basis upon which tenders and estimates may be prepared. Therefore, to evaluate the present product and market it, it is necessary to measure the performance and business efficiency. COST ACCOUNTING NOTES P DF DOWNLOAD. Then, it provides the following advantages: 1. (v) No analysis of causes of losses – Financial accounting does not analyse losses- owing to wastage of materials, ideal time etc. 1. The term ‘Cost Accounting’ is defined in different ways by various authorities as follows: Kohler – “It is that branch of accounting dealing with the classification, recording, allocation, summarisation and reporting of current and prospective costs”. Carrying cost represents the cost to maintain inventory, lock up cost of inventory, store rent, and store operation expenses. Download revision notes for Computerized Accounting System class 11 Notes Accountancy and score high in exams. All the above limitations of financial accounting have been overcome by cost accounting. Installation of Cost Accounting System 13. The three major branches of accounting are Financial Accounting, cost accounting and management accounting. Cost Accounting is a Branch of Knowledge: Requisites of a Good Cost Accounting System, Learn Accounting: Notes, Procedures, Problems and Solutions, Cost Accounting and Management Accounting: Difference, Cost Accounting and Financial Accounting | Accounting, Cost Accounting and Management Accounting. Cost classification—arrangement of items of cost accumulated, in logical groups having regard to their nature and purpose (subjective as well as objective classification); 2. Need 8. Bangalore University. Disadvantages. vi. It begins with the recording of income and expenditure and ends with the preparation of periodical statements. COST ACCOUNTING Study Note 1 : Introduction to Cost Accounting 1.1 Definition, Scope, Objectives and Significance of Cost Accounting 1 1.2 Cost Object, Cost Centers and Cost Unit – Elements of Cost 7 1.3 Classification of Cost 13 Study Note 2 : Cost Ascertainment - Elements of Cost 2.1 Material Cost (CAS-6) 23 2.2 Employee Costs (CAS-7) 71 There may be different types of cost drivers such as number of units or types of products required to produce. Content Filtration 6. Van Sickle – “Cost Accounting is the science of recording and presenting business transactions pertaining to the production of goods and services, whereby these records become a method of measurement and means of control”. Costing simply means cost finding by any process or technique. 5. Cost Accounting The phase of accounting that has to do with collecting, determining and controlling costs, particularly costs of producing a given product or service, is called cost accounting. Previous article Business law notes Download pdf. Costing refers to the technique and process of ascertaining costs. Some expenses are attributable to cost. To advise the management on the profitability of present or new lines of products, the comparative advantages and disadvantages of different types of production methods, the replacement of manual operations by automation, and other such policy matters which have a direct impact on the development of the company. Google+. 7. This definition is authoritative. The technique consists of the principles and rules for determining the cost of products and services. Some costs are actual, such as raw material cost, freight cost, labor cost, etc. His area of expertise is concentrated in Accounting Forensics, which focuses on financial fraud, creative accounting, and anti-money laundering. The accounting is Importance 11. Terms of Service 7. The following factors have accelerated the system of cost accounting in our country: i) Increased awareness of cost consciousness by Indian industrialists with a view to ascertain costs more accurately for each product or job. The business has to wage a war for its survival. 9. 102 Introduction to management accounting (102) Nature and scope of management accountng Defniton of management accountng: Wilson and Chua 1993 “Encompassing techniques and processes that are intended to provide fnancial and non-fnancial informaton to people within an organisaton to make beter decisions and thereby achieve organisatonal control and enhance organisatonal … Accounting 1A Class Notes Chapter 1 – Introduction to Accounting and Business Page 3 S. Aviles Net Income or Loss is always determined OVER A DEFINED SPAN OF TIME Example: Net Income for the 12 months ended December 31, 2017. The requirements of management may be summarised as follows: To face severe competition in the business world, a management always needs to maintain their customers. Again in order to install a costing system a business has to make a cost benefit analysis i.e., the amount of cost to be incurred and the likely benefits to be derived from it. 3. Aids in price fixation – Though economic law of supply and demand and activities of the competitors, to a great extent, determine the price of the article, cost to the producer does play an important part. ii. This is one of the important aspects which distinguish Cost Accounting from Costing. The main objectives of cost accounting are as follows: 1. 3. The following points can be taken under the concept of “need”. Value addition of the product may be due to some process on product or to make the product available or there may be other reasons; but it also includes the profit share on it. To compute product-wise profit, and advise the management for the enhancement of profit. It is not easy to quantify the need and importance since it cannot be concluded about where the work of a cost accountant comes to an end. When the cost is fully consumed and no future monetary value could be measured, it is called expired cost. Measurement of Performance and Efficiency: The application of Cost Accounting methods in Indian industries was felt from the beginning of the 20, Nature: Cost Accounting is a Branch of Knowledge, Cost Accounting is a Science, Cost Accounting is an Art and Cost Accounting is a Profession. 11. Sometimes loss is incurred due to shortage of stock such as loss in sale, loss of goodwill of a business or idle machine. Helps in channelising production on right lines – Costing makes possible for the management to distinguish between profitable and non-profitable activities. In recent years cost accounting has become one of the important professions which have become more challenging. Notes for Management. Costing simply means cost finding by any process or technique. The efficiency can be measured and costs controlled and through it various devices can be framed to increase the efficiency. To provide a perpetual inventory of stores so that interim P & L A/c and Balance Sheets can be prepared without actual stock-taking and checks on stores and adjustments are made at frequent intervals. Note of Cost Cost Accounting for Commerce | lecture notes, notes, PDF free download, engineering notes, university notes, best pdf notes, semester, sem, year, for all, study material Nature: Cost accounting is a branch of accounting. Shilling – “Cost Accounting as a body of concepts, methods and procedures used to measure, analyse or estimate the costs, profitability and performance of individual products, departments and other sequences of a company’s operations, for either internal or external use or both and to report on these questions to the interested parties”. Additionally, he is the author of the books "Accounting for Beginners: Interactive Video Textbook" and "What College Didn't Teach You!". If there is any change in cost driver, the cost of product changes automatically. a. 4. Meaning and Definitions of Cost Accounting 3. Content Guidelines 2. Introduction to Cost Accounting 2. Twitter. The steps required to install a costing system are as follows: 1. Scribd is the world's largest social reading and publishing site. Cost accounting is defined as"a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. They get benefit indirectly through increase in consumer goods and directly through continuous employment and higher remuneration. The organizational structure should be studied to ascertain the scope of authority of each executive. To ascertain the wastage in each process of manufacture and to prepare reports which can assist wastage control. But cost accounting denotes the formal mechanism by means of which costs are ascertained and data are provided for various purposes of management. Budgets are prepared on the basis of forecasts of future costs and revenue. Cost Accounting : An Introduction MODULE - 6B Elementary Cost Accounting 27 Notes COST ACCOUNTING : AN INTRODUCTION After passing your senior secondary examination, if you set up a small manufacturing unit, say manufacturing of packing boxes, a problem will arise what price of each box you should quote to the buyer. University. Workers have a vital interest in their employer’s enterprises and the industry in which they are employed. The overall economic development of a country takes place due to increase in efficiency of production. 5. (iii) No identification of reasons for variation in cost – It is not possible from Financial Accounts to ascertain the reasons for the variation in cost of any two or more periods. 6. 9. Urgent costs are not be postponed. Such efforts also include the presentation of information for the purpose of managerial decision-making and keeping statistical records. Cost Accounting Principles and Practice, Jain, I. But can only give information on the same. Costing can be carried out by the process of arithmetic, by means of memorandum statements or by the methods of integral accounts. In normal times, we can say that profit or loss shown by Profit and Loss account is an indicator of overall efficiency or inefficiency. Secondly, a large number of students have enrolled in these institutes to obtain costing degrees and membership for earning their livelihood. In every course you will find the difference in learning. Get a verified writer to help you with Introduction to Cost and Management Accounting Notes. 2. It will help the management in forming future lines of action. According to definition given by CIMA, London “Cost Accounting is the process of accounting for cost from the point at which expenditure is incurred to the establishment of its ultimate relationship with cost centres and cost units”. Cost of closing stock of raw materials, work-in-progress and finished products can easily be ascertained. Introduction and Classification of Cost Concept of Cost. To serve the management in the valuation of goods-in-process and finished goods, so that the minimum capital is blocked up in the stocks. Helps to increase productivity and earning capacity, 9. 4. Post Views: 934. Without avoiding any expenses, if we are able to defer some expenses to future, then it is called a postponable cost. Art includes the ability and skill with which a cost accountant applies his cost accountancy background and knowledge to the problems of cost ascertainment, cost control and ascertainment of profitability. Cost Accounting and Allied Accounting Subjects and provide good qualitative and quantitative information to managers for forecasting and planning future financial activities. (vii) No cost data for managerial decisions – Financial accounting does not provide cost data for taking various managerial decisions. Don't waste time. 4. Next article Cost and Management Accounting and Quantitative Techniques Notes. The information provided should be accurate and there has to be a regularity in supplying the accurate information to the management. These problems include the ascertainment of cost control of costs, ascertainment of profitability etc. Financial accounting (BCA 306) Uploaded by. It is an organised body of knowledge consisting of its own principles, concepts and conventions. Therefore, a large company may have a number of accountants engaged in this activity. Suitable to the Business – A Cost Accounting system should be designed according to the nature, type and size of the business. The nature of cost accounting can be discussed under the following headings: Though cost accounting is considered as a branch of financial accounting, it is one of the important branch of knowledge. vii. 10. According to definition given by CIMA, London “Cost Accounting is the process of accounting for cost from the point at which expenditure is incurred to the establishment of its ultimate relationship with cost centres and cost units”. It includes labor, direct expenses, and overhead. The process of costing is the day-to-day routine of ascertaining costs. 7. Added value means value addition to any product. To achieve the objectives of a business organization a good Cost Accounting system should be. It is these published financial statements which are generally the basis for investment decisions by the shareholders, lending decisions by banks and financial institutions and credit decisions by vendors. 4. By realising importance of Cost Accounting techniques, benefits available to the industries, Government of India has made compulsory the maintenance of cost accounts to most of the industries in the corporate sector. Introduction to Accounting - Lecture Notes - Free download as PDF File (.pdf) or read online for free. This helps in cost control. Financial Accounting Definition: Financial accounting is the process of preparing financial statements that companies’ use to show their financial performance and position to people outside the company, including investors, creditors, suppliers, and … Introduction To Cost Accounting ... ¾ Cost object, Time span, Linear functional form ¾ Relevant range- the band of cost driver activity in which a specific relationship between a cost and a driver holds. To calculate the cost per unit of the various products manufactured by the firm. It is necessary for a cost accountant to have intimate knowledge of all these field of study in order to carry on day-to-day activities. Search Search If you are preparing for Civil Service Examination, these notes will definitely help you to get an overall idea about the subject. In cost accounting, the amount of resources that is given up in exchange for some goods or services is known as cost. The cost changes according to the stage a product is in, for example, raw material, work in progress, finished goods, etc. 11. Cost allocation—assigning a whole item of cost, or of revenue, to a single cost unit, centre, account or time period. Besides this, Government made ‘Cost Audit’ compulsory to these industries. Meaning and Definitions of Cost Accounting 3. Budgeting is a powerful tool that helps the management in performing its functions such as planning, coordinating Cost Accounting Procedure and Techniques 14. Cost accounting is a systematic procedure for determining the cost per unit of output produced or services rendered. Cost Accounting is the process of accounting for costs. So the management would be well advised to ascertain the profit or loss of each product separately. Cost Accounting is the process of accounting for costs. Involves heavy expenditure since the system has to maintain numerous records, 2. Research costs are incurred to discover a new product or to improve an existing product, method, or process. 2. To maximise profit by minimising costs, it is necessary to set up standards and then compare actual costs with these standards. The additional functions can be briefly listed as under: 1. Here, science includes the body of systematic knowledge a cost accountant should possess for proper discharge of his responsibilities. For cost ascertainment different techniques and systems of costing are used under different circumstances. Costing has a vital role to play in almost any activity which involves expenditure of money, whether it is a business house or a charitable concern or whether it is a Government Department. TAGS; b.com notes; Facebook. To reveal sources of economies in production, having regard to methods, types of equipment, design, cost centres or responsibility centres, output and layout. An efficient costing system brings prosperity to the concerned business enterprises resulting into stepping up of the government revenue. As an aid to management it also provides invaluable information to enable management to maintain effective control over stores and inventory, to increase efficiency of the business and to check wastage and losses. If available facilities remain idle and some loss incurred due to it, it is called idle facilities cost. Cost accounting, on the other hand, is defined as the process of accounting for cost from the point at which expenditure is incurred or committed. iv) Increased Government control over pricing led the Indian manufacturers to give more importance to the installation of cost accounts. c. Opportunity costing—ascertainment of revenue foregone from alternative use of the resource. Guide to business policy – Cost accounting aims at serving the needs of management in conducting the business with utmost efficiency. They are benefitted because of systems of incentives, bonus plans etc. Cost Accounting Books. Expired cost relates to current cost. Cost center refers to a particular area of activity and there may be multiple cost centers in an organization. Profitable and unprofitable activities are disclosed. The method of remunerating the labour should also be checked and introduce attractive incentive plans if necessary. 10. The producer can take necessary guidance from his costing records. Profit centers adopt policies to achieve such targets. Financial accounting is developed to communicate economic information of an organization as a whole. The technique is, however, dynamic and changes with the change of time. Comparability – The cost records should be maintained in such a way to facilitate comparison between present and past figures. ... Introduction; Absorption Costing: Introduction. Not applicable for all types of industry. financial accounting and management unit introduction to accounting book keeping it is the art of recording the business transactions in set of books. For fixing prices of products or services, it is necessary to have information regarding each product or unit of service rather than total expenditure. 8. This feature is necessary because business environment is not stable. Cost accounting increases the overall productivity of an industrial establishment and, therefore, serves as an important tool in bringing prosperity to the nation. C & Nigam, B.M.L Prohibited Content 3. Differential costing—ascertainment of the difference in total cost between alternatives. The Chartered Institute of Management Accountants, London, defines cost accountancy as “the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control. To coordinate with the industrial engineers for the introduction and implementation of methods suggested for improvement and or redundancy of programmes and data. This will help the different levels of management to receive the necessary cost data in time in order to enable them to fulfil their individual responsibilities in an efficient manner. 4. Some expenses are variable, some are semi-variable, and some of fixed nature. Costing renders great assistance in measuring productivity and suggesting ways to improve it. Costing, Cost Accounting and Cost Accountancy: In practice, the terms ‘costing’ and ‘cost accounting’ are used interchangeably. These are the Computerized Accounting System class 11 Notes Accountancy prepared by team of expert teachers. The subject has been developed to mitigate the limitation financial accounting originally had. Moreover, big business requires delegation of responsibility, division of labour and specialisation. Introduction to Cost Accounting: Meaning & Deﬁ nition, Scope and use of cost accounting, Relationship between Financial Accounting and Cost Accounting , Role of Cost accounting in Decision-Making, Cost concepts, Element of cost, classiﬁ cation of costs, Preparation of cost … Costing guides future production policies. No business will have a common costing system readily available to meet the cost information. to ascertain cost. The layout of the factory and its details should be properly studied. Practice includes the continuous efforts of a cost accountant in the field of cost accountancy. 8. v. Wastages are eliminated – As it is possible to know the cost of the article at every stage, it becomes possible to check various forms of waste, such as time, expenses etc., or in the use of machine, equipment and tools. Helps investor’s, moneylenders and other financial institutions to know about the business, 10. Copyright 9. 1. Cost Accounting – Theory and Problems, Maheshwari, S.N and Mittal, S. N. (2009) Cost Accounting, Rajasekaran, (2010), 1st ed, Pearson Education. The cost of a product cannot be perfect and it may vary for the same product depending upon different constraints and situations of production and market. 5. will be disclosed if the various operations involved in manufacturing a product are studied by a cost accountant. If capacity is unused due to repair, shut down or any other reason, it is called capacity cost. Unnecessary details should be avoided as for as possible. b. It also explains in detail the sources of profit or loss revealed by the financial accounts; thus helps in presentation of better information before the management. (iv) No classification of expenses – Financial accounting does not classify expenses into direct and indirect, controllable and uncontrollable expenses. Functions. To establish an effective reporting system. 7. 14. To earn revenue, some expenses are incurred like rent, salary, insurance, selling & distribution cost, etc. Only, Cost Accounting system can provide this information to the management. In case of impersonal call center, the activities are done with the help of plant and machinery. Cost apportionment—to spread revenues or costs over two or more cost units, centres, accounts or time periods (also known as ‘indirect allocation’); 4. Some of these costs are of capital nature and some of these are called deferred revenue expenditure. To develop new product, improve existing product, and improved method in producing a product called development cost. Management has to avoid the possibility of waste at each stage. Requisites 12. It is that specialised branch, of accounting which involves classification, accumulation, allocation, absorption and control of costs. Losing a contract due to shortage of stock such as number of units or types of cost:. 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