.

MID –SEMESTER EXAMINATIONS

Organisational chart.
The concept of management.
Different between cost Accounting and Finance Accounting.
Chapter 3.
And chapter 6.

Cost Accounting:
Cost accounting is the accounting method for ensuring cost-effectiveness by accumulating, organising,
recording, calculating, analysing and assessing the overall expenses incurred on a product, process or project,
etc. It is mostly used in industrial units or factories where the goods are manufactured. Unlike financial
accounting, cost accounting is a broader perspective to review and control the performance of the industries by
the management. To know more about the different types of expenses incurred in operating a business, one
must be aware of the cost classification.

Cost Accounting refers to that branch of accounting which deals with costs incurred in the production of units
of an organization. On the other hand, financial accounting refers to the accounting concerned with recording
financial data of an organization, in order to exhibit exact position of the business.

Scope of Cost Accounting:

Cost accounting is being widely applied by the production units to modify the process and maximize the profit.

Following are the various applicabilities of the cost accounting techniques:

Objectives Of Cost Accounting:
Cost accounting aims at eliminating the loopholes in the production process and ensures manufacturing of
goods at the lowest possible cost. Other than this, there are multiple objectives of the cost accounting
practices. Let us now discuss its importance in detail:
Limitations:
Cost accounting is a complex stream of accounting. It requires a lot of analysis and calculations to give
accurate results.

To know more about the limitations or objections about cost accounting, read below:

Cost accounting is not sufficient alone to control or reduce the cost of products or services. It is necessary to use
the data so generated to take corrective actions which require a lot of experience and expertise.

Moreover, it differs from the financial accounting we practice in day to day life. To get an accurate result, a
reconciliation statement has to be prepared.

In the books of accounts, many entries have to be made twice; once in the final accounts and then in the cost
accounts, which is a tedious process. Due to the lengthy process of duplicate entries, there is a need for
additional efforts from the personnel. Thus it increases the labour charges for the organisation.
It is majorly applicable to the industries, factories and manufacturing units where some production function
takes place. It is less useful for service industries.

Cost Accouting:
Cost accouting is concerned with recording, classifying and appropriate
allocation of expenditure for the determination of the costs of products or
services and for the suitably arranged data for purposes of control and guidance
of information to management for decision making.
Cost means "the price paid for something".

Three Major Elements of Cost:

1.  The value of material
2.  The amount of labour
3.  Otherexpenses incurred 

Objectives and Functions of Cost Accouting:

1. To ascertain the cost per unit of the different products manufactured by a
business concern.
2.  To provide a correct analysis of cost both by process or operations and by
different elements of cost.
3. To disclose sources of wastage whether of material, time or expense or in the
use of machinery, equipment and tools and to prepare such reports which may
be necessary to control such wastage.
4. To provide requisite data and serve as a guide for fixing prices of products
manufactured or services rendered.
5.  To ascertain the profitability of each of the products and advise management
as to how these profits can be maximised.
6. To exercise effective control if stocks of raw materials, work-in-progress,
consumable stores and finished goods in order to minimise the capital locked up
in these stocks.
7. To reveal sources of economy by installing and implementing a system of cost
control for materials, labour and overheads.
8. To advise management on future expansion policies and proposed capital
projects.
9. To present and interpret data for management planning, evaluation of
performance and control.
10. To help in the preparation of budgets and implementation of budgetary
control.
11. To organise an effective information system so that different levels of
management may get the required information at the right time in right form for
carrying out their individual responsibilities in an efficient manner.
12. To guide management in the formulation and implementation of incentive
bonus plans based on productivity and cost savings.
13. To supply useful data to management for taking various financial decisions
such as introduction of new products, replacement of labour by machine etc.
14. To help in supervising the working of punched card accounting or data
processing through computers.
15. To organise the internal audit system to ensure effective working of different
departments.

Scope of Cost Accouting:

There are lot of techniques, procedures, process and programmes are used in
cost accouting for calculating cost and itscontrol.
But basically, we divide its scope within three major parts:
1. Cost ascertainment 
2. Cost record 
3. Cost control

Advantages of Cost Accouting:

Cost accounting has so many advantages but the followings are the main
advantages given:
1. Helps in controlling cost: Cost accounting helps to control the cost of the
business by applying different type of techniques and methods such as standard
costing and budgetary control etc.

2. Helps in fixing prices: Cost accounting also helps to fix the prices of product or
service.  It provides detailed cost data of each product in aggregate as well as in
per unit, which helps in fixation of selling price. Cost accounting provides basis
information for the preparation of tenders, estimates and quotations.

3. Provides cost information: It provides necessary cost information to the

management for planning, implements and controlling.

4. Ascertains the total per unit cost of production: It ascertains the total and per unit
cost of production of goods and services that helps to fix the selling prices as
well.

5. Discloses the profitable and non profitable activities: It discloses the profitable

and non profitable activities that enable management to decide to eliminate or
control unprofitable activities and expand or develop the profitable activities.

6. Provides information for the comparison of cost: It provides reliable data and

information which enable the comparison of cost between periods, volume of
output, determent and processes.

7. Checks the accuracy of financial accounts: It helps checking the accuracy of

financial accounts. This is done by preparing cost reconciliation statement.
8. Helps invests and financial institutions: It is also advantageous to investment
and financial institutions since it discloses the profitability and financial position in
which they intend to invest.

9. Beneficial to workers: It is beneficial to workers as well since it emphasizes the

efficient utilization of labor and scientific systems of wages payment.

Functions Of Cost Accounting

Following are main functions of cost accounting:

 To work out cost per unit of the different products manufactured by the organisation;
 To provide an accurate analysis of this cost;
 To maintain costs to the lowest point consistent with the most efficient operating conditions. It
requires the examination of each cost in the light of the service or benefit obtained so that the
maximum utilization of each rupee will be obtained;
 To work out the wastage in each process of manufacture and to prepare reports as may be necessary
to assist in the control of wastage;
 To provide necessary data for the fixation of selling price of commodities manufactured;
 To compute profits earned on each of the products and to advise management as to how these profits
can be improved;
 To help management in control of inventory so that there may be minimum locking up of capital in
stocks of raw materials, stores, work-in-process and finished goods
 To install and implement cost control systems like Budgetary Control and Standard Costing for the
control of expenditure on materials, labour and overheads;
 To advise management on future expansion;
 To advise management on the profitability or otherwise of new lines of products;
 To carry out special cost studies and investigations which are invaluable to management in
determining policies and formulating plans directed towards profitable operations

COST VS FINANCIAL ACCOUNTING

Cost accounting financial accounting

definition
information type related to material labor foh of monetary terms
etc

which type of cost is used for historical and only historic

recording predetermined

users only by internal internal and external

management

mandatory no yes

time of reporting frequently once an year

purpose controlling cost keeping record

Job AND PROCESS COSTING

The costing method used for the ascertainment of cost of each job is known as job costing

And the process costing is the technique used to determine the cost of each process

Job costing is performed where the products produced of specialized nature where as process costing is used
where standasrdize products are produced

In job costing the cost is calculated for each job but in process costing first of all the cost of each process is
calculated which is then dispersed over the number of units produced

In job costing job requires special treatment on the other hand no special treatmenet is required for each
process in process costing

There is no transfer of cost in job costing from one job to another

The possibility of cost reduction us very less in job costing

Job costing the cost is ascertained after the completion of the job

Cost Of Production report