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INTRODUCTION TO COST ACCOUNTING

INTRODUCTION TO COST ACCOUNTING. Concept of cost. Definition and meaning of Cost As per ICWA, India, Cost is the price of resources used for the purpose of production of goods or rendering of services. As per the Institute of Cost and Management Accountants, London,

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INTRODUCTION TO COST ACCOUNTING

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  1. INTRODUCTION TO COST ACCOUNTING

  2. Concept of cost Definition and meaning of Cost • As per ICWA, India, Cost is the price of resources used for the purpose of production of goods or rendering of services. • As per the Institute of Cost and Management Accountants, London, “Cost is the amount of expenditure, actual or notional, incurred on or attributable to a given thing.”

  3. Concept of Costing • Costing is a process of determination of cost of product or services. • It is referred to as classifying, recording and appropriate allocation of expenditure for determination of the costs of products or services. • It consists of rules and principles of ascertainment of costs of a product or service.

  4. Concept of Cost Accounting Definition of Cost Accounting • Wheldon defines Cost accounting as, “classifying, recording and appropriate allocation of expenditure for determination of costs of products or services and for the presentation of suitably arranged data for purposes of control and guidance of management.” • It is the technique and process of ascertainment of costs, which begins with recording of expenses or the basis on which they are calculated and ends with preparation of statistical data.

  5. Objectives of Cost Accounting • To ascertain cost of product or services rendered • To provide information for planning and control • To analyse the data and provide suitable information to management to take deciscions. • To provide data for periodical profit and loss account and balance sheet • To assist management in fixation of selling price • To present comparative cost data for different periods • To provide the basis for production planning.

  6. Cost classification • Cost classification is the process of grouping costs according to their common features.

  7. Classification of cost On the basis of behaviour of cost On the basis of functions On the basis of controllability Other basis On the basis of time Fixed cost Variable cost Pre-determined cost Historical cost Selling & distribution cost Research & development cost Manufacturing cost Administration cost Pre-production cost Controllable cost Non- controllable cost Conversion cost Normal cost Avoidable cost Unavoidable cost

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