Cost accounting originated during the Industrial Revolution in England as a tool for industrial management. Financial accounting alone did not provide comprehensive evaluation of costs, performance, and factors influencing managerial decisions. As a result, cost accounting developed as a supplementary method. It takes a different approach than financial accounting by undertaking responsibility for evaluating every cost-related activity and furnishing relevant data to management for timely decision making. In India, cost accounting gained importance due to increased cost consciousness, competition, government economic policies, and establishment of organizations to develop the cost accounting profession, like the Institute of Cost and Works Accountants of India.
3. Origin of Cost Accounting
The Industrial revolution in england presented a challenges to the development of
accounting as a tool of industrial management Costing techniques are developed as
guides to management actions.To take action and decisions, management needs
information, Cost accounting is designed to serve the management by undertaking the
responsibility of a comprehensive evaluation of each and every cost related activity and
furnishing the relevant data to take timely and appropriate action.
6. Financial accounting does not undertake a comprehensive evaluation of
1. Cost effectiveness and economies
2. Performance of departments,functions products etc.
3. Factors which influences and which have bearing on the managerial
decisions etc.
Because of this businessmen have been eager to adopt supplementary
accounting methods known as cost accounting.
The approach of cost accounting is different from that of financial accounting
Cost accounting started as a branch of Financial Accounting
The vital importance that Cost accounting has acquired in the modern age is
because of the growth of complexities in modern industry
7. Application of Cost Accounting in Indian context:
1. Increased awareness of cost consciousness by Indian industrialists with a view to
ascertain costs more accurately for each product or job.
2. Growing competition among manufactures led to fixation of prices at a lower level so as
to attract more customer.
3. Govt economic policy emphasising in planned economy.
4. Increased Govt control over pricing led to Indian manufacturers to give more importance
to the installation of cost accounts.
5. The establishment of National Productivity council in 1958 and a statutory body Viz.
Institute of Cost and Works Accountants of India.
For development of Cost Accounting profession in India, Govt passed an act viz. “Institute of
Cost and Works Accountants Act 1959”
During last 60 years Cost Accounting emerging as important tool to the management for
improving efficiencies and the profitability of the organisation
