Meaning & Definition Objectives of Cost Accounting Advantages of Cost Accounting Difference between Cost Accounting and Financial Accounting Cost concepts and classifications Elements of cost

1. Dr R SAROJA DEVI
Department of Commerce
Karpagam Academy of Higher Education
(Deemed to be University)
Coimbatore-21

2. OUTLINE
 Meaning & Definition
Objectives of Cost Accounting
Advantages of Cost Accounting
Difference between Cost Accounting
and Financial Accounting
Cost concepts and classifications
Elements of cost

3.  “Cost is the amount of resource given up in exchange
for some goods and services. The resource given up
are money and money’s equivalent expressed in
monetary units”.
 Costing: It is referred to as classifying, recording and
appropriate allocation of expenditure for the
determination of the costs of products or services”
 “Cost Accounting is concerned with recording,
classifying and summarizing cost for determination
of cost of products or services, planning, controlling
and reducing such costs and furnishing of
information to management for decision making”.

4.  The institute of cost and works
accountants, India defines” cost
accounting is the technique and process
of ascertainment of costs.
 Cost accounting is the process of
accounting for costs, which begins with
recording of expenses or the bases on
which they are calculated and ends with
preparation of statistical data”.

5. Cost Book-Keeping
Cost System
Cost Ascertainment
Cost Analysis
Cost Comparisons
Cost Control
Cost Reports

6.  To ascertain the cost per unit of the different products
manufactured by the business concern.
 To provide a correct analysis of cost both by process
or operations and by different elements of cost.
 To disclose sources of wastage whether of material,
time or expense or in the use of machinery equipment
& tools.
 To provide requisite data & serve as a guide to price
fixing of products manufactured or services rendered.
 To ascertain the profitability for advising the
management.

7.  To exercise effective control of stock, raw
materials, working progress & finished
products.
 To reveal the sources of economy.
 To help in supervising.
 To organize the internal systems, Cost reduction
programs.
 To provide specialized services of cost audit.
 To find out costing Profit or Loss.

8.  Benefits to the Management
 Benefits to the Employees
 Benefits to Creditors
 Benefits to the Government
 Benefits to Consumers/Public

9.  It is expensive
 The system is more complex
 Inapplicability of same costing method and
technique
 Not suitable for small scale units
 Lack of accuracy
 It lacks social accounting

10.  It is a sub-field in accounting. It is the process
of accounting for costs.
 Provides data to management for decision
making and budgeting for the future.
 It helps to establish certain standard costs and
budgets.
 provides costing data that helps in fixing
prices of goods and services
 Is also a great tool to figure out the efficiency
of a unit or a process. It can disclose wastage
of time and resources

13. Classification of
cost
Elements
of cost
Material
Cost
Labour
cost
Expenses
Cost
Functions
of cost
Factory cost
Administration
cost
Selling and
distribution
cost
Research &
Development
cost
Identifiblity
cost
Direct
Cost
Indire
ct cost
Behaviour
cost
Fixed
cost
Varia
ble
cost
Semi-variable
cost
Controllable
cost
Controllable
cost
Uncontrollab
le cost
Normalit
y cost
Norm
al cost
Abnorm
al cost

14.  Marginal Costing
 Standard Costing
 Direct Costing
 Historical Costing
 Uniform Costing
 Absorption costing

15. Job Costing: It is defined by ICMA, London as that form of
specific order costing, which applies where work is
undertaken to customer’s special requirements.
Contract Costing: It is applied where the job is big and of no
longer duration. For each individual contract, separate
accounts have to be kept.
Batch Costing: A batch may represent a number of small orders
in batches through the factory. ICMA defines as “that form of
specific order costing, which applies where similar articles are
manufactured in batches either for sale or for use within the
undertaking.
Multiple costing: It means a combination of two or more of the
above methods. The system of costing is adopted in
manufacturing concerns where a variety of parts are produced
separately and later assembled into a final product.
Process Costing: It applies to industries where production is
carried on through different stages before becoming a finished
product.

16. Single output or Unit Costing: Under this method
production is continuous and units are identical.
Producing a single article or a few articles, choosing the
cost unit depends upon the nature of the product.
Operation Costing: This method is used where there is a
mass production and processes are repetitive in nature,
and there is a detailed application of processes costing.
Operating Costing : It is suitable to those industries which
render services instead of producing goods e.g. transport
companies, electricity companies, railways, hospitals etc.
Departmental Costing: It is a method of cost finding
adopted to ascertain the cost of operating a department or
a cost centre separately.

17.  Prime Cost = Direct Materials + Direct Labor +
Direct Expenses
 Works or Factory Cost = Prime Cost + Works or
Factory Overheads
 Cost of Production = Factory or Works Cost +
Administration Overheads
 Total Cost or Cost of Sales = Cost of Production +
Selling and Distribution Overheads