1. Cost Accounting : An Overview Introduction of Cost Accounting : Cost accounting has been developed due to limitations of financial accounting. Financial accounting is concerned with record keeping directed towards the preparation of Profit and Loss,Account and Balance Sheet.
It provides
information regarding the profit and loss which is helpful for the management
to control the major functions of business like finance, administration,
production and distribution.But details regarding operating efficiency to these
divisions are lacking in financial accounting. Cost accountancy is the
application of costing and cost accounting principles, methods and techniques
to the science , art and practice of cost control and the ascertainment of
profitability. CONTINUE READING...
2. Cost Audit The Institute of Cost and Management Accountants of England defines Cost Audit as follows - "the verification of cost records and accounts and a check on adherence to the cost accounting procedures and their continuing relevance".
Thus, cost audit involves the following:
i. Examination of
correctness of cost accounts : This involves verification of the cost
accounting system, the methods and techniques of costing; the accuracy of the
cost accounts and the reports generated.
ii. Ensuring that the
Cost Accounting Plan has been adhered to :
This involves checking whether the objectives/policies laid
down by the management are in accordance with the Cost Accounting Plan.
1.2 Objectives of Cost Audit: The objectives of cost audit
can be summarized as follows -
i. Protective
Objectives
a) To examine
whether proper cost accounting records as per the provisions of the Companies
Act have been maintained. CONTINUE READING...
3. Causes of Difference in Cost and Financial Statement
Causes of differences:-
1) Purely
financial items:
i)
Appropriation of Profits-Transferred to reserves,goodwill,preliminary expenses,
dividend paid etc.
ii)Loss on sale of investment,penalties and
fines.
iii) Interest received on bank
deposits,profit on sale of investments,fixed assets,transfer fees. CONTINUEREADING...
4. Role of a Cost Accountant in a Manufacturing Organisation
A cost accountant in a manufacturing organisation plays
several important roles
i.He establishes a cost accounting department in his concern.
ii. He ascertains the requirement
of cost information which may be useful to organisational managers at different
levels of the hierarchy.
iii.He develops a manual, which
specifies the functions to be performed by the cost accounting department. The
manual also contains the format of various forms which would be utilised by the
concern for CONTINUE READING...
5. Classification of Costs:
a. On the basis of Time period:
1. Historical
Costs: Costs relating to the past period, which has already been incurred.
2. Current Costs:
Costs relating to the present period.
3. Pre-determined
Costs: Costs relating to the future period; Cost, which is computed in advance,
on the basis of specification of all factors affecting it.
b. On the basis of Behaviour / Nature / Variability:
1. Variable Costs:
These are costs which tend to vary or change in relation to volume of
production or level of activity. These costs increase as production increases
and vice-versa e.g. cost of raw material, direct wages etc. However, variable
costs per unit are generally constant for every unit of the additional output. CONTINUE READING...
6. Cost Accounting Techniques
Cost accounting plays a vital role in helping businesses analyze, control, and optimize their costs. It provides valuable insights into the various components of production, operation, and service delivery. Within cost accounting, several techniques and methods have been developed to aid in cost measurement, analysis, and decision-making.
In this article, we will explore some of the key cost accounting techniques that businesses employ to enhance their financial management and operational efficiency. CONTINUE READING...