COST AND ASSET ACCOUNTING

• The design engineer, by analyes of costs and profits, attempt

to predict whether capital should be invested in particular
project. After the investment is made, records must be
maintained to check on the actual financial results.
• These records can be of considerable value to the engineer,
since they indicate where errors were made in past estimates
and give information that can be used in future evaluations.

OUTLINE OF ACCOUNTING PROCEDURE

• The standard accounting procedure, starting with the
recording of the original business transactions and proceeding
to the final preparation of summarizing balance sheets and
income statements. As the day-by day business transactions
occur, they are recorded in the journal.
• Thesestatements are presented in the form of balance sheets and
income statements.
Figure:- Diagram of accounting procedure
 BASIC RELATIONSHIP IN ACCOUNTING
Assets = equities (1)
Equities can be divided into two general classes as follows:
(1) Proprietorship – the claims of the concern or person who owns the asset; and
(2) Liabilities- the claims of anyone other than the owner

Assets = liabilities + proprietorship (2)

Total income = costs + profits (3)

THE BALANCE SHEET

 A balance sheet for an industrial concern is based on Eq. (1) or (2) and
shows the financial condition at any given date.
Assets are commonly divided into the classifications of current, fixed and
miscellaneous.
Current assets, in principle, represent capital which can readily be converted
into cash.
Fixed assets, such as land, buildings and equipment, cannot be converted into
immediately cash.
Consolidated balance sheet
THE INCOME STATEMENT
MAINTAINING ACCOUNTING RECORDS

DEBITS AND CREDITS

THE JOURNAL

THE LEDGER

 COST ACCOUNTING METHODS

 ACCUMULATIONS, INVENTORY AND COST- OF –SALES ACCOUNTS

MATERIAL COSTS