Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Afm class30-31ppt


Published on

I have find

Published in: Business
  • Be the first to comment

  • Be the first to like this

Afm class30-31ppt

  1. 1. Accounting for managers <ul><li>UNIT-3 </li></ul><ul><li>COST ACCOUNTING </li></ul>
  2. 2. COST ACCOUNTING BASIC CONCEPTS AND TERMS AGENDA: Meaning Concepts Types Differences Methods Techniques
  3. 3. Meaning: <ul><li>Cost Accounting is a quantitative method that </li></ul><ul><li>accumulates,classifies,summarizes and interprets financial </li></ul><ul><li>and non-financial information for three major purposes: </li></ul><ul><li>* ascertainment of cost of a product or service; </li></ul><ul><li>* operational planning and control; and </li></ul><ul><li>* decision-making. </li></ul>
  4. 4. Definition: <ul><li>According to Chartered Institute of Management </li></ul><ul><li>Accountants- </li></ul><ul><li>Cost accounting as that part of management </li></ul><ul><li>accounting which establishes budgets and standard costs </li></ul><ul><li>and actual costs of operations,processes,departments or </li></ul><ul><li>products and the analysis of variances, profitability or </li></ul><ul><li>social use of funds. </li></ul>
  5. 5. Cost Concept: <ul><li>Cost concepts supports the view that business cost is </li></ul><ul><li>a release of value for the acquisition or creation of </li></ul><ul><li>economic resources and is measured in terms of monetary </li></ul><ul><li>sacrifice involved. </li></ul><ul><li>Resources sacrificed or foregone to achieve a specific </li></ul><ul><li>object. </li></ul>
  6. 6. Types of costs: <ul><li>Historical cost: </li></ul><ul><li>It is measured by actual cash payments for acquiring assets,or goods and services. </li></ul><ul><li>Estimated cost: </li></ul><ul><li>It is a predetermined cost. </li></ul><ul><li>Standard cost: </li></ul><ul><li>Most scientifically predetermined cost. </li></ul><ul><li>Average cost: </li></ul><ul><li>It is the unit cost which is computed by dividing the total cost by the volume involved. </li></ul><ul><li>Marginal cost: </li></ul><ul><li>Measured by the change in cost due to change in output by one unit. </li></ul>
  7. 7. Types of costs contd., <ul><li>Replacement cost: </li></ul><ul><li>This is the current cost of replacing an asset. </li></ul><ul><li>Opportunity cost: </li></ul><ul><li>Measurable cost of the alternative uses of resources. </li></ul><ul><li>Sunk cost: </li></ul><ul><li>It represents historical cost which is irrecoverable in a given situation. </li></ul><ul><li>Controllable cost: </li></ul><ul><li>These are the costs which can be influenced by the action of an individual in an enterprise within a given time span. </li></ul><ul><li>Relevant costs: </li></ul><ul><li>Costs appropriate to aiding the making of specific management decisions are called relevant costs. </li></ul>
  8. 8. Differences between Financial and Cost Accounting: <ul><li>Purpose </li></ul><ul><li>Form of Accounts </li></ul><ul><li>Recording </li></ul><ul><li>Control </li></ul><ul><li>Periodicity of Reporting </li></ul><ul><li>Analysis of Profit </li></ul><ul><li>Reporting of Costs </li></ul>
  9. 9. <ul><li>Nature of Transactions </li></ul><ul><li>Information </li></ul><ul><li>Fixation of selling price </li></ul><ul><li>Figures </li></ul><ul><li>References </li></ul><ul><li>Relative efficiency </li></ul><ul><li>Stock valuation </li></ul><ul><li>Type of Science </li></ul>
  10. 10. Methods of costing: <ul><li>Job Costing- To ascertain cost and profit or loss in respect of each job undertaken:- </li></ul><ul><li>Batch costing </li></ul><ul><li>Contract costing/terminal costing. </li></ul><ul><li>Process Costing- To costing of process or operation involved in converting materials into finished goods. </li></ul><ul><li>Farm Costing- The main of accounting carried out in one or more fields. </li></ul>
  11. 11. Techniques of costing: <ul><li>In each of the costing methods,various techniques may be used in ascertaining costs. These techniques may be grouped according to their approaches as follows: </li></ul><ul><li>Absorption costing </li></ul><ul><li>Standard costing </li></ul><ul><li>Marginal costing </li></ul><ul><li>Life cycle costing </li></ul><ul><li>Target costing </li></ul>