COST ACCOUNTING

PRESENTSTION
Presented by:
•Vinamra Paliwal(6434)
•Kumar Satyam (6567)
•Gaurav (6536)
 CONTENT
01 MEANING OF COST ACCOUNTING

02 OBJECTIVE OF COST ACCOUNTING

DIFFERENCE BETWEEN COST , FINANCIAL AND MANAGEMENT

03 ACCOUNTING

04 TECHNIQUES OF COSTING

05 CONCLUSION

06 THANKING
 Accounting
Accounting is the process of recording financial transactions
pertaining to a business. The accounting process includes
summarising, analysing, and reporting these transactions to
oversight agencies, regulators, and tax collection entities

Accounting is one of the key functions for almost any business. It may be handled by
a bookkeeper or an accountant at a firm, or finance departments with dozens of
employees at larger companies. The reports generated by various streams of
accounting, such as cost accounting and managerial accounting, are invaluable in
helping management make informed business decisions
 Types of accounting

Financial Management
Accounting
Accounting Accounting

Cost
Accounting
COST
ACCOUNTING
Cost accounting is a managerial accounting
process that involves recording, analyzing,
and reporting a company's costs.

Cost accounting is helpful because it can

identify where a company is spending its
money, how much it earns, and where money
is being lost.
 Cost terminology
COST : cost means the amount of expenditure incurred on particular things
COSTING: Costing means the process of ascertainment of costs.
COST ACCOUNTING: The application of cost control methods and the ascertainment of
the profitability of activities carried out or planned”.
COST CONTROL: Cost control means the control of costs by management. Following are
the aspects or stages of cost control.
JOB COSTING: It helps in finding out the cost of production of every order and thus helps
in ascertaining profit or loss made out on its execution. The management can judge the
profitability of each job and decide its future courses of action.
BATCH COSTING: Batch costing production is done in batches and each batch consists of
a number of units, the determination of optimum quantity to constitute an economical
batch is all the more important.
 types of cost
FIXED COST:Fixed costs stay the same and do not change throughout the project lifecycle. Examples of fixed
costs include setup costs, rental costs, and other related costs.

VARIABLE COST: Variable costs are costs that change with the amount of work involved with a project.
Examples of variable costs are hourly labor, the cost of material, the cost of supply, fuel for bulldozers, etc.

DIRECT COST:Direct costs are expenses that are billed directly to the project. Examples of direct costs are
team travel expenses, team wages, costs incurred for recognition and awards for employees, etc.
:
INDIRECT COST: costs that are shared and allocated among several or all projects. Example of indirect costs
would be the salary of an architect or a project manager who is partially allocated across many projects.
Their team members' salaries would be direct costs since each of them is directly working on a particular
project and their salary is a direct cost to the project. But since the project manager is allocated to several
projects, the costs incurred on his salary are indirect costs to the project
 INDIRECT
DIRECT
MATERIAL
MATERIAL
LABOUR COST

Labour cost refers to remuneration paid to the

employees in from of wages, salary, and bonus,
allowances etc. for their time and effort used in
producing goods or services. .

In other words, monetary resources payable to the employee for their mental
and physical sacrifice is called the labour cost. The institute of cost and
management accountants (ICMA), London has defined labour cost as "the cost
of remuneration of the employees of an undertaking".
 DIRECT LABOUR
direct labour cost is that portion of wages
and salaries, which can be identified and
charged to a single costing unit. It is the
remuneration of the employees who are
directly connected with the manufacturing
operations or the conversion of raw
materials into finished products. The
important characteristic of direct labour
costs is that, it can be indentified with and
allocated to workmen put on definite jobs or
products in the factory.
INDIRECT
LABOUR
indirect labour cost is the remuneration of
the employees who are not directly
connected with manufacturing operations.
The indirect employees are not directly
associated with the conversion process but
assist in the process by way of supervision,
mamintance, transportation of material,
materials handling etc. their work benefits
all the items being produced and cannot be
specifically identified with the individual
product
 Expenses
*An expense is the cost of operations that a company incurs to
generate revenue.

*Businesses can write off tax-deductible expenses on their

income tax returns, provided that they meet the IRS’ guidelines

*Accountants record expenses through one of two accounting

methods: cash basis or accrual basis.

*There are two main categories of business expenses in

accounting: operating expenses and non-operating expenses

*The IRS treats capital expenses differently than most other

business expenses.
 Types of Expenses
Expenses can be categorized in a variety of ways

*Expenses can be defined as fixed expenses, such as rent or mortgage;

those that do not change with the change in production.

* Expenses can also be defined as variable expenses; those that change

with the change in production. These include utilities and the cost of
goods sold.
* Expenses can also be categorized as operating and non-operating
expenses.
*Direct expenses are those which rely on the manufacture and sale of
products or services by a company. Examples of direct expenses are
wages, customs duty and excise duty. Indirect expenses are those that a
company must pay to keep its business running smoothly
 GOALS AND OBJECTIVES
Cost Determination Cost Control Cost Planning Performance Evaluation
To determine the cost To control costs by To plan and budget for
To evaluate the performance of
identifying areas of future costs based on
of producing goods or departments, managers, and
historical data and
services by collecting Inefficiency and employees based on cost-related
projected business
implementing cost metrics
and analyzing cost data. activities
saving measures
 DIFFERENTIATION
FINANCIAL COST
ACCOUNTING ACCOUNTING
Financial Accounting is Cost accounting is the
concerned with process of accounting for
recording, classifying and costs. It embraces the
summarising financial accounting procedures
transactions and relating to recording of all
preparing statements income and expenditure
relating to the business in and the preparation of
accordance with generally periodical statements and
accepted accounting reports with the object of
concepts and conventions ascertaining and
controlling costs.
MANAGEMENT
ACCOUNTING
Management accounting is
concerned with accounting
information which is
useful for the management.
It is "the presentation of
accounting information in
such a way as to assist the
management in the
creation of policy and day
to day operation of the
undertaking
 Basis Financial Cost Management
Record transactions & Ascertainment, allocation, To assist the management
Objects financial determine
position & profit or loss.
accumulation and
accounting for cost
in decision-making &
policy formulation.

Nature Concerned with historical

data
Concerned with both past
and present recorded
Deals with projection of
data for the future

Principle Certain principles

No set principles are
Followed Governed By GAAP followed for recording
followed in it.
costs.

Uses quantitative both

Data used Qualitative aspects are
not recorded
Only quantitative
aspect is recorded.
and qualitative
concepts.
Techniques of costing

Marginal Costing Direct Costing

Standard Costing Absorption Costing

Historical Costing Uniform Accounting

 The premise of marginal costing is to divide all costs into fixed and variable

Marginal Costing
costs.Fixed costs are unrelated to production levels. As the name implies, these
costs stay constant regardless of manufacturing volume.Variable expenses
fluctuate according to production levels

Historical costing is the process of determining and recording costs

after they have occurred. It serves as a record of what has occurred and, Historical Costing
as a result, is a postmortem of the actual costs

Standard costing is a process in which a company compares the expenses

Standard Costing
incurred for the manufacture of goods to the expenditures that should have
been incurred.In essence, it is a comparison of actual costs vs conventional
expenses. Variances are the discrepancies between the two.

All direct expenses are charged to operations, processes, or

products, whereas all indirect costs are written off against Direct Costing
profits in the period in which they occu
 Absorption costing incorporates all direct costs and overhead
associated with manufacturing a product. Absorption costing allocates
fixed and variable overhead costs to each unit produced during a
reporting period whereas variable costing considers only variable
Absorption costing
overhead, not fixed, as a product cost.

Uniform Costing Uniform costing ensures that everyone is using the same
methods to report financials. The most common industries
required to use uniform costing are public utilities and
industries that involve trade associations or receive federal
subsidies (e.g., cotton, transportation, education).
 Conclusion
Cost accounting is a system of recording and analyzing the cost of products or services in
order to contribute towards strategic planning and improve cost efficiency. It’s
important for many parties involved in a business, including management, employees,
and consumers. Although cost accounting and financial accounting are interrelated, they
provide different results. Cost accounting tells you about the cost of producing individual
items, while financial accounting shows you profit and loss for the company as a whole.
While there are advantages to using a dedicated cost accounting system, a company
that’s efficient enough to track its own costs can manage all its records without having a
formal system in place