Expenses vs Cost

Science- logic backed, since based on principles therefore scinece

GAAP is filled with gaps(flexibilty)-loops
if gaps in GAAP are misused then it is a fraud
miinterpreation of gaaps
observe the logic behind the data

Revenue- byjus
measurement affetcts the profit

sources of monet
debt and equity
problem of decisioms making
in case of titaina nd pcj

goal asymmetry-interest may not be same

bod ke decsion not achienve sh ke goals
information assymetry- agent has more informaion, agnt try to use gap to provide information whih may not be align principle

over period of time average holding of promoters

accounting of information byexternal to internals
unit of analysis: company level gaap says provide information at company level not unit level

COST AND MANAGEMENT ACCOUNTING (ADM)

NOT FOR SHAREHOLDER, BUT FOR MANAGEMENT- NOT MATAINED FOR EXTERNAL BUT FOR INTERNAL, THEREFORE GAAP NO
GAAP NOT REQUIRED AS SELF IS TRUTH HOGA AS UNKO HI USE KARNA HAI
OUTPUT DEPENDS ON THE MANAGERIAL DECISION
DECISION CAN BE ANY-
FOCUS ON PRICING/ MAKE OR BUY/CLOSE OR CONTINUE/LEASE OR BUY/HIRE OR OUTSOURCE
NO STANDARD TEMPLETE
UNIT OF ANALYSIS: NOT COMPANY LEVEL BUT PRODUCT/CUSTOMER/BRANCH/DIVISION/BRAND
COST SHEET(STANDARD)-BY US- PURPOSE OF COST SHEET IS IMPORTANT TO DEFINE (EXAMPLE-BM KA PRICING)
PRICING OF THE PROGRAM FOCUS ME TO LOOK FOR COST - DETAILS FOR SLEF NOT FOR SH LEVEL

SOME NEED TO SHARE THE ENTIRE COST DATA LIKE TATA POWER BUT NOT FOR LAPTOP WHY? DEPENDS ON NATURE OF THE
maximization of deiviosn profit maybe not lead to mazimation of the entire companywhy? Answer later session

Cost- Expense incured, actual or notional for procuding or selling a product

cost is not sameas value/price/
Costing: process of cost detrminatio
Costing mamangement: applicationof cost data for decision making
understand, compute and use the cost

Cost:
asset vs expense:
assets: unexpired benefit future cash flow ability)
expennse: if expired benefit
source of information is still through finicail statements which are used by outsiders but used by internal
actual: which involves of cash
notional : which does not involve outflow of cash- example: not deprecipation
differnce between notoional (kabhi nhi pay kiya hai) and non cash (abhi nhi hua hai outflow for a period)
opporunity cost - the benefit gone to get the the next alternate
usually see atuual but to leverageuse notornation ass well

understanding the cost:

classification of cost: to undertand decision better
puropose of classifiaction is important for cost to have have some meaning
every classifiation is to have purpose to drive some meaning
will answer something about expenses

on basics of : on element of cost. TC=MATERIAL COST+LABOUR COST+EXPENSE(we need to know separate because that helps
on the basis of identification and significance: directly or indirectlt: example flama direct and itc indirect. TC= DIRECT COST+IN

TC IS NOT ENTIRE EXPENSE AND FUTURE CLASSIFICATION

OVERHEAD - CHANGES THE WAYS OF MAKING DECISION OF COST
purpose- classification- unsderstand cost- and determination and secison of cost
indirect cost are overheads(burden of cost)
whih may not be align principles

TERNAL, THEREFORE GAAP NOT REQUIRES, SINCE INFORMATION ABOUT SELF SO NO ADUIT REQUIRED

-BM KA PRICING)

DEPENDS ON NATURE OF THE INDUSTRY - REGULATOTR AND NON REGULATORY

wer later session
w separate because that helps toreduce cost) (THERE NEED TO UNDERSTAND KISKA KITNA PERCENTAGE HAI,
indirect. TC= DIRECT COST+INDIRECT COST HERE AGAIN PRICING IS IMPORATNT FROM THE PURPOSE, DECIDE INDIRECT DIRECT EXAMPLE
DE INDIRECT DIRECT EXAMPLE LIBARARY STAFF- WHICH WORK FOR OUR PRHRAM(BM)WE SAY OUR FACULTY THAT INVOLVE IN OUR PRG
TY THAT INVOLVE IN OUR PRGRAM IS DIRECT
, Income Statement
Sales (8000 units) 650,000
Dividend 85,000
Profit on sale of investment 100
735,100
Cost of goods sold(8000 units) 280,000
Wages 5,000
Salary 10,000
Discount 500
Rent 1,500
Depreciation 1,800
Impairment ( Plant) 6,500
loss due to currency fluctuations 9,200
impairment (investments) 150
loss on sale of investment 50
Loss on sale of old plant 120
Electricity 175
Fuel expenses 100
Provision for Bad debt 25
Bad debt 1,500
Insurance (Plant and property) 15
Carriage inward 10
Carriage outward 45
Lease rent on building 65
Lease rent on plant 45
Royalty for using technology 18
Amortisation of know-how 12
Interest 65
Commission on sales 40
Brokerage for purchase of shares 15
Amortisation of share discount 80
Loss due to market fluctuation (inventory) 35
Penalty (imposed by the IT department) 2,000
Financial audit fee 10
Forensic audit fee 26
sitting fees to the directors 80
Entertainment expense 45
319,226
Profit before tax (PBT 415,874
Tax (25%) 103,969
Profit after tax (PAT) 311,906
 287,000 68% 35.875 cost of operatings
12,370 cpu(cost per unit)
423,260 Total exp 52.9074 our objective is understand this breakage

123,890 29% 15.4862 other costs other than operating

interest, impairment, and income tax are not included in cost- why?
in costing we will keep financing decision separte , only focus on operationg cost
not always ignore fiancing ,depends- purpose s defined
financing is ept separte untilnot said
pricig is the process of cost recovery
objecive is to recovery which cost we want to recovery
because of this it is a context we consider- what/why you want to recovery
Total expenses
423,195

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Anwesita Pattanaik