Whats Cost Accounting?

Its the formal mechanism by

means of which costs of products
or services are ascertained and
controlled.
Financial Accounting
Vs Cost Accounting
Financial Accounting
1. To prepare Final A/cs for
reporting to owners and
outsiders.
2. Statutory requirement (As
per Companies and Income
Tax Act)

Cost Accounting
1. Its prepared to provide
detailed cost information to
management for proper
planning, decision- making
and control.
2. Its voluntary except where
Cost Accounting Record
Rules have been framed
for maintenance of cost
accounting records.
3. It reveals the profit
& loss of the
business as a whole
during a particular
business.
4. Normally prepared
at certain intervals.
3. It shows the detailed
coast and profit data for
each product, line,
department, process
etc.
4. Its continuous process
and may be prepared
daily, weekly, monthly,
quarterly or annually.
Purposes of cost accounting
Ascertainment of costs
Determining the selling price
Determining and controlling efficiency
Preparation of financial statements-ascertaining closing stock
Providing a basis for operating policy-
- determination of cost-volume-profit relationship
- whether to shut down or operate at a loss
- Whether to make or buy from outside suppliers
- Whether to continue with the existing plant and machinery or to
replace them by improved and economic ones