Introduction : Nature and Scope of Cost accounting, cost,concept

Introduction Nature and Scope of Cost accounting cost concept

Cost accounting is such a system of accounting in which accounts of expenses are prepared with the objective of knowing and controlling the cost

According to Walter W. Bigg, "Cost accounting is the provision of such analysis and classification of expenditure as to enable the total cost of any particular unit of production to be ascertained with reasonable degree of accuracy and at the same time to disclose exactly how such total cost is constitued." 

The characteristics of cost accounting are : 

(a) Cost accounting is a branch of accounting.

 (b) Cost accounting is both, an art and a science.

 (c) Cost accounting is also helpful in controlling the costs. 

The main objectives of cost accounting are as follows:

 (a) Cost determination. fbj Cost control.         foT Cost reduction.

 d) Guidance to management. fe 

Determination of selling price.

 Compliance to statutory requirements. 

. The main techniques of determining cost are as follows:

 (a) Historical costing. 

(b) Standard costing. 

(c) Marginal costing.

 (à) Direct costing. 

(e) Absorption costing. 

() Uniform costing. 

.(The amount of expenditure (actual or normal) incurred on or attributable to a specified thing or activlty is known as cost.) 

The technique and process of ascertaining costs is known as costing. 

 Cost Allocation is the protess whereby cost items are charged direct to a cost unit or cost centre, i.e. a cost can be specifically identified with a department such that the cost is allocated to that department.

Apportionment is the process of division of costs among two or more cost centres on estimated basis of benefit received. 

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Cost accountancy is the application of costing and cost accounting principles, methods and techniques of the science, and art practice of cost control and the ascertainment of profitabitity. It Includes the piresentation of information derived for the purpose of managerial decision-making 

Cost reduction means permanent and genuine reduction In per unif cost of goods produced or services rendered. 

Cost audit means an examination of the appropriateness of the cost accounting system adopted by the business and effectiveness of its implementation. 

 

Cost reporting means communication of cost data on regular basis which may be used by management for decision-making or which are made avallable to government or some outside agencies. 

The four advantages of cost accounting are as follows

 (a) Control on wastage of material and labour.

 (b) Economy in cost. 

(c) Proper utilisation of resources.

 (d) Budgetary control. 

Cost accounting system provides cost control which leads to a reduction in the cost of product and services. This helps the organisation to offer product and services to the consumers at a ower price and of good quality. 

The three limitations of a cost accounting are: 

(a) Based on estimates. 

(b) Non-inclusion of certains items. 

(c) Problems of marginal costing 

The three main subjective features of an ideal system of cost accounting are as follows: 

(a) Simplicity. 

(b) Suitability to the business.

 (c) Flexibility. 

Personal cost centre is a cost centre which consists of a person or a group of persons. 

 Uncontrollable costs are the costs which cannot be influenced by the action of a specified ber of an undertaking.

Aprice is the value that will purchase a finite quantity, weight, or other measures of goods vices. As the consideration given in exchange for transfer of ownership, price forms the (E102)

essential basis of commercial transactions. It may be fixed by a contract, left to be determined by an agreed upon formula at a future date, or discovered or negotiated during the course of deamigs between the parties involved. on 

Cost Of Goods Sold 

(sometimes referred to as "cost of sales" or COGS) is a ngure winch reflects the cost of raw materials used to produce a product to sell to customers. COGS is the dneçe cost of producing a product for sale.

 It could be: 

(a) Cost of items purchased for resale.

 (b) Cost of raw materials used to produce a product. 

(c) Cost of parts used to construct a product. 

  HIFO means Highest In First Out

. It is based upon the idea that the inventory value of materials should be kept at the lowest possible price and consequently the highest priced materials are treated as being issued first, irrepective of the date of purchase. Jimpli