What is cost accounting?Process that aims to capture a companys costs ofproduction by assessing the input costs of each step ofproduction, as well as fixed costs such as depreciation ofcapital equipmentFirst measure and record these costs individuallyCompare input results to output or actual results to aidcompany management in measuring financialperformance.
Importance of cost accounting 1.Classification and Subdivision of Costs: Cost accounting classifies cost and income by every possible divisions Data regarding costs by departments, processes, functions, products, orders, jo bs, contracts and services can easily computed
2.Helps in determining selling price Since CA analyses the cost of each unit, it gives an idea about the cost of production This awareness helps to decide adequate selling price High price and low price affects the company Helps in decision making during period of depression, competition etc.
3.Disclosure of profitable productsCA analyses each and every units, so the most profitable unit an d unit making loses can be easily identifiedSo, decision regarding which all activities are to be promoted, which all are to be modified or avoided can be easily taken.This will help to improve the overall performance and profit.
4.Control of material and supplies In CA materials are allocated according in terms of departments, jobs, unit of production or service This helps to minimize misappropriation, loses from defective,spoiled,scrap and out of date material supplies
5.Control of labour cost Cost accounting analyses the time spent by each worker, wage rate of each worker per job etc This enables to find the cost of labour, measure efficiency or inefficiency of labour force etc. It also helps to assign the best suited job for each employee. Thus cost of labour can be controlled
6.Idleness can be detected Cost accounting values each single unit So it is easy to detect the idleness which result in wastage of time, money and other resources Proper steps can be adopted to avoid this loss
7.Reliable check on generalaccounts Cost accounting facilitates us to check the reliability of general accounts It identifies exact cost for the decrease/increase of profit/loss Thus proper measures can be adopted
CONCLUSION The main objective of the cost accounting is to pinpoint the efficiencies and inefficiencies, if any, in the use of material, labour and machinery. Since cost accounting analyses each possible units it is beneficial to management as well as the employees
A particular slide catching your eye?
Clipping is a handy way to collect important slides you want to go back to later.