Cost accounting is the application of costing principles and techniques to ascertain costs and facilitate managerial decision making. It includes costing, budgetary control, cost control, cost analysis, and cost audits. Cost accounting provides formal mechanisms to determine costs of products and services. It analyzes past, present, and future data to inform managerial actions. Costing is the process of calculating costs, while cost accounting refers to the overall system. Budgetary control compares actuals to plans. Cost control involves planning, communication, motivation, reporting, and decision making to maintain returns and productivity. Cost analysis classifies costs by behavior. Cost audits verify cost account accuracy and adherence to cost accounting plans.
2. Introduction and subjects
Cost accounting is the application of
costing & cost accounting principle,
methods & technique of the science, art
and practice of the cost control
ascertainment of profitability.
It also includes the presentation of
information derived for the purpose of
managerial decision making.
It is thus the science art & practice of a
cost accountant.
3. Aspects
Cost accounting
Costing
Budgetary control
Cost control
Cost analysis
Cost audit
4. Cost accounting
Cost accounting is the formal
mechanism by means of which
cost of products or services are
ascertained and controlled.
It is a part of MIS which
analyses past, present and
future data to provide the basis
for managerial action.
5. Costing
Costing is the technique and
process of ascertaining costs.
It should not be confused
with the cost accounting .
Costing can be carried out by
the process of arithmetic , but
the cost accounting denotes the
formal mechanism by means of
which cost are ascertained.
6. Budgetary control
It is a means of control in which
the actual state of affair is
compared with that planned for
so as to obtain a measure of
control over the operation and
operating costs of that
undertaking
7. Cost control
It includes :
planning,
communication,
motivation,
reporting, and
decision making.
A suitable cost control system helps in
maintaining expected return on capital
employed, increasing productivity of men,
machine and other resources, fixing price
and economical stability of the organisation.
8. Cost analysis
Cost are properly analyzed
according to behaviour.
Examples: fixed, variable and
semi-variable or relevancy e.g.
relevant cost or irrelevant cost
for the purpose of managerial
decision making, such as make
or buy, replacement of plant and
introducing a second shift, etc.
9. Cost audit
It is the verification of the
correctness of cost accounts
and check on the adherence of
the cost accounting plan.
It is essential where cost
accounting is carried out on a
large scale .
10. Elements of cost
Material-This is the cost of
commodities and materials used
by the organization.
Direct material- which becomes
integral part of finished goods
Indirect material- can’t be
identified with the individual cost
centre as lubricants, stationery,
consumable goods etc.
11. Elements of cost
Labour-cost of remuneration
paid to the employees of the
organisation.
Direct-the labour cost which can
be identified with the cost centre
Indirect- which can’t be identified
with the cost centre as
storekeeper’s salary etc.
12. Elements of cost
Expenses- cost of service
provided to the organization
including (Assets cost)
Direct exp.- Hire charges of
machinery etc
Indirect- Rent, Telephone bill etc.
13. The aggregate of Direct Material
cost, Direct Labour cost and
Direct expenses is termed as
‘PRIME COST’
The aggregate of Indirect
Material cost, Indirect Labour
cost and Indirect expenses is
termed as ‘overheads’
14. COST CENTRE
Cost center is defined as a
location, person, or time of
equipment in or connected with
an undertaking, in relation to
which cost may be ascertained
and used for the purpose of cost
control.
Impersonal & personal
Production and service