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! 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