Cost Accounting

Lecture 1
There are many definition of Cost Accounting. Two of which are Measuring and reporting financial and other information relating to the organizations acquisition or consumption of resources. It provides information for both managing and financial accounting. The process of accounting for cost. It is the mechanism by which the cost of products or services are ascertained and controlled. Difference between Management Accounting and Financial Accounting FINANCIAL ACCOUNTING MANAGERIAL ACCOUNTING Primary Users of Reports External users, who are stockholders, Internal Users, who are officers, Creditors, and Regulatory Agencies department heads, managers, and supervisors in the company Types and Frequency of Report Classified financial statements. Issued Internal Reports. quarterly and annually Issue as frequently as needed Purpose of Report To provide general purpose information for To provide specific purpose information for all users. particular use for a specific decision Contents of Reports Pertains to entity on a whole and is highly Pertains to subunits of the entity and may aggregated (Condensed) be very detailed. Limited to double entry accounting system May extend beyond double entry system to and cost data. any type of relevant data. Reporting standard is generally accepted Reporting standard is relevant to the accounting principle (GAAP) decision to be made. Verification Process Annual independent audit by certified No independent audits. public accountant Management of an Organization performs three broad functions. Planning Directing and motivating Controlling

To perform the three management function effectively, management needs information. One very important type of information is related to cost. For example: What costs are involved in making the product? If production volume is decreased, will cost decrease? What impact will automation have on total costs? How can costs best be controlled in the organization?

But what is cost? Accountants define cost as a resource sacrificed or foregone to achieve a specific objective. Costs have several classifications:Actual Cost is the costs incurred (historical Costs) as distinguished from a budgeted (or forecasted) cost. Cost Object is anything for which a measurement of cost is desired.