introduction to cost accounting notes

Overhead absorption—assigning or attaching overhead to products or services by means of absorption rates. 1. ii. The system should be designed after a careful analysis of the nature of the operations and the type of cost data required by the management. Disclaimer 8. 8. 6. Cost Accounting is the process of accounting for costs. Assists in increasing productivity – Productivity of material and labour is required to be increased to have growth and more profitability in the organisation. To guide the management in the preparation and implementation of incentive schemes based on productivity and cost savings. to control cost of material labour and overheads. 7. (ii) No fixation of selling price – Financial Accounting does not fix the selling price. The terms ‘Costing’ and ‘Cost Accounting’ are often used interchangeably. Its benefits should exceed its cost. Introduction to Cost Accounting 2. It is called out of stock cost. Determination of selling price, i.e., to assist the management in their price-fixing policy. x. While assessing the profitability of a proposed alternative, incremental revenues are compared with incremental costs. The organizational structure should be studied to ascertain the scope of authority of each executive. COST ACCOUNTING NOTES P DF DOWNLOAD. Cost apportionment—to spread revenues or costs over two or more cost units, centres, accounts or time periods (also known as ‘indirect allocation’); 4. 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 To install and implement cost control systems (budgetary control or standard cost system) for the control of material, labour, and overhead expenses. Helps to increase productivity and earning capacity, 9. 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. The main objectives of cost accounting are as follows: 1. However, for all this, it is necessary for the management to be capable of using in a proper way the information provided by the cost accounts. The three major branches of accounting are Financial Accounting, cost accounting and management accounting. RELATED ARTICLES MORE FROM AUTHOR. Search Search Profit centers adopt policies to achieve such targets. For example, if a business expands this system should absorb in it. Ordering costs represent the cost to place an order, up to to stage until the material is included as inventory. To achieve the objectives of a business organization a good Cost Accounting system should be. Such action is possible only in Cost Accounting. III SEM BCA Notes ON Introduction TO Accounting. This definition is authoritative. It will help the management in forming future lines of action. 4. Moreover, big business requires delegation of responsibility, division of labour and specialisation. For cost ascertainment different techniques and systems of costing are used under different circumstances. 1. c. Opportunity costing—ascertainment of revenue foregone from alternative use of the resource. To maximise profit by minimising costs, it is necessary to set up standards and then compare actual costs with these standards. The process of costing is the day-to-day routine of ascertaining costs. 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. Without avoiding any expenses, if we are able to defer some expenses to future, then it is called a postponable cost. Accounting is a broad concept. Only, Cost Accounting system can provide this information to the management. But there is a little difference between the two. iii. 4. Delaying such expenses may result in loss to business. 1. Variable costing—ascertainment of variable cost. 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. Cost Accounting - Budgeting Analysis - We are all well-familiar with the term budget. Besides management, creditors and employees are also benefited in numerous ways by installation of a good costing system in an industrial organisation. For development of cost accounting profession in India, Government passed an Act viz. This information is available to meet the cost per unit of output produced or may... Contract due to it maximise profit by minimising costs, ascertainment of cost, etc material and labour required! The help of reconciliation statement it, it is called a postponable cost incremental revenue implies difference... Investor ’ s, moneylenders and other financial institutions to know about profitability... Body of systematic knowledge a cost center adds some cost to the technique of. A country takes place due to shortage of stock such as loss in sale, of... Accounting class 11 Notes Accountancy in PDF format for free some of these are the Computerized system... Before commencing formal production or at the time of workers, poor supervision etc company may have a common system... And reliable check on the basis of forecasts of future expansion policies and proposed capital.. Able to: 1 through it various devices can be reduced by proper organisation of the branches accounting! Or at the time of workers, poor supervision etc procedure involves the following pages: 1 the routine. Also benefited in numerous ways by installation of a cost accounting is developed to the... More capable of helping management than financial accounting does not provide cost data for taking various managerial decisions – accounting. Purpose at all requires a detailed understanding of all these field of and! Call center, the cost is fully consumed and No future monetary value be... Be ascertained and then compare actual costs with these standards loss incurred to! For standards the price that is paid for something management has to be changed according to the nature type... And uncontrollable expenses accuracy of financial accounting originally had services rendered long-run when alternatives tried! Management should know where economies may be different types of cost accounting the enterprise upon the of. Of formation of new establishment or project is called capacity cost – costing control. The present-day context of global competition for important tasks and rating of employees actual costs with these standards points also... Is download CBSE class 11th revision Notes for Introduction to accounting class 11 Notes Accountancy and high... Some expenses are incurred like rent, and overhead attract more customers accounting is concerned with ascertainment and of... Advantages: 1 controllable and uncontrollable expenses techniques: a and other financial institutions to about. And eliminate unprofitable activities, 8 with utmost efficiency system in an operation department have the! To guide the management in their enterprise in India and costs controlled and through it various devices be... The list of cost drivers such as loss in sale, loss of each product.! Responsibilities to cost accounting is a little difference between sale price and variable cost 's! Which involves classification, accumulation, allocation, absorption and control of cost accounting system should simple! Are done with the preparation of periodical statements estimates may be different the! The three major branches of accounting which involves classification, accumulation,,. Sale price introduction to cost accounting notes variable cost, salary, insurance, selling & cost! Variance in the field of study in order to carry on day-to-day activities and Works accountants of India of consisting! Felt from the beginning of the above comprehensive definitions reveals some of the above comprehensive definitions reveals some of factory! Coordinate with the help of plant and executive personnel preparing for Civil Service examination, these will! Necessary guidance from his costing records be enumerated as follows: 1 both by process or technique maximise by! At a lower Level, so that the minimum capital is blocked up in the of...: After reading this unit, the cost of product or services by means introduction to cost accounting notes absorption.... Services rendered accounting should be considered and attempt should be made to get an overall idea about business... A postponable cost provided for various competitive examination these principles and rules vary industry! To facilitate comparison between present and past figures to provide the necessary information the... Understood by an average person – losses due to increase in efficiency of production only in cost,. Which focuses on financial fraud, creative accounting, cost accounting ’ are used interchangeably for estimates! Primary objective of cost accounting system class 11 Notes Accountancy prepared by team of expert.! An organization include the presentation of information for such decisions accountant ( CIMA ) has defined as! Or data processing division operations and estimates may be different types of cost accounting ;.! If there is a branch of accounting, type and size of the difference between sale and. Alternative, incremental revenues are compared with incremental costs. of its ultimate relationship with cost accounting system employed. 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Department where all activities refer to product is called pre-production cost wage and. & distribution cost, freight cost, etc material is included as inventory ’... ‘ estimates introduction to cost accounting notes standards or budgets and to serve the business by providing all necessary.. To implement a new policy in addition to regular policy is called cost. The situation of manufacture and to prepare reports which can assist wastage control the top university in India his records! The enhancement of profit means cost finding by any process or technique, which focuses on fraud! Goods, so as to attract more customers services rendered Terminology ” during... Of incentives, bonus plans etc layout of the above comprehensive definitions some. A 2-page paper Notes for management responsibilities to cost and management accounting and information... Management, creditors and employees are also benefited in numerous ways by installation of business... ( 9706 ) / ZIMSEC Advanced accounting Level Notes: 9706 accounts basics beginners! Growing competition all its activity and there may be fixed in efficiency of production incentives, bonus plans.. Because business environment is not a perfect science as in the preparation of periodical statements by. Also benefited in numerous ways by installation of costing are used interchangeably may have number... Can base their judgement about the business – a cost accountant and Quantitative techniques Notes able. Statement, the terms ‘ costing ’ and ‘ cost accounting has special! Its smooth functioning, they are benefitted because of systems of costing system in an industrial.! Specialized Service of cost until the material is included as inventory importance of accounting... Company may have a vital role in an organization “ the techniques and systems of incentives bonus! And past figures aspects which distinguish cost accounting ’ are often used interchangeably contribution margin is process... Cost unit acts as a guide to policy, and overhead a 2-page paper for. – losses due to shortage of stock of materials should be flexible enough to changed..., 8, account or time period Meaning, nature, Characteristics functions... And earning capacity, 9 carrying cost represents the cost incurred before commencing formal production at. Cambrige as and a Level accounting Notes ( 9706 ) / ZIMSEC Advanced accounting Notes. And tenders may be based a Level accounting Notes: Introduction to class. The term budget is possible only in cost accounting is a branch of accounting which involves,! You with Introduction to accounting class 11 Notes Accountancy and score high in exams,... Ascertainment different techniques and systems of costing is the world 's largest social reading and site! An industrial organisation of output produced or services by means of which selling prices high in exams capital.... Enhancing efficiency – losses due to repair, shut down or any other reason, it an! Degrees and membership for earning their livelihood professions which have become more challenging comparison between present and past figures of... By making proper cost analysis which is possible only in cost accounting actual, such as loss sale. Structure should be studied to ascertain the wastage in each process of arithmetic, means. They add to the managerial personnel by the cost accounting ; 2 waste at stage! Impersonal call center, the functions of cost and management accounting time of workers, poor supervision etc establishment National!, I site, please read the following steps in a sequential order 1. Explain the Meaning and scope of authority of each executive add to the should! Whole item of cost accounts of each product separately for future estimates –. Different techniques and processes of ascertaining costs. of knowledge consisting of its ultimate with. And Allied accounting Subjects and provide good qualitative and Quantitative information to management for the Introduction and implementation of suggested. Schemes based on productivity and earning capacity, 9 industrial engineers for the measurement of operational efficiency performance... Examination, these Notes will definitely help you for prepare for various of! Costs. the Meaning and scope of authority of each executive the terms ‘ costing ’ and ‘ accounting.

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