WHAT IS COST?
The expenses incurred to produce a raw material to finished product is called cost.
In other words cost means the expenses incurred to bring raw material into usable conditions.
WHAT IS COSTING?
The process of recording, classifying, summarising & interpreting costing information is called Cost Accounting.The process or technique of ascertaining cost is called Costing.
Features Of Costing:
1.It is the process of accounting for cost.
2.It records income & expenditure of the production.
3.It is concerned with cost ascertainment & cost control.
4.It involves the preparation of a periodical cost statement.
SCOPE & FUNCTION OF COST ACCOUNTING
The technique and concept of cost accounting are used in different forms of organisation in schools, colleges, hospitals and financial institution.The various scope/functions of cost accounting are discussed below.
1.Cost Ascertainment
It involves recording, classifying and allocation of various cost to find out cost of production.It also helps to know total cost per unit.
(ii) cost control
It’s cost information helps to point out the areas of wastage & inefficiency. It also helps to take necessary steps for cost control.
(iii) Preparation of cost statement
It is another important scope of cost accounting it ensures in preparation of periodical statements to know cost information.
(iv)Managerial guide
It provides sufficient cost information to the management body. It enables them to take effective decision and solve expected problem .
Objective of cost Accounting
1.Ascertainment cost
It is the primary objective of cost Accounting the cost of each job process 8 operation.
2.fixation of selling Price
It provides sufficient cost information to the management body; it enables them to determine selling price by adding a suitable rate of Profit.
3.Find out profit of each activity
It is anothere objective of cost accounting is to delemean the profit of each activity by company the cost with its revenue.
4.increase Good will
It enables an organisation to produce quality good at reasonable price it. indirect help increase reputation & Good will of organisation.
5.Improve efficiency
Its. comparative study among standand & actual cast help to local areas of wastage & ineffiency so helps to take corrective action to increase efficiency.
6.Helpful for Government
The information provided by cost accounting is very much helpful to Government for making policies of import & export .
7.Find out ecpect causes
Cost Accounting also helps to find out expect cause of profit or loss which enables to take necessary steps for Smooth running of origanisation.
Essential of goods costing system
A good costing system most have the following features.
1.simplicity
The costing system should be easy to understand & simple to operate. It can be understand by any body at a glance.
2. Flexibility
The costing system should be a flexible one, show that changes can be made accounting to situation.
3.Economical
The costing system shouldn’t be enpenssive it should be adjusted according to the financial capacity.
4.Comparision
It should be provide sufficient information show that comparision canbe made among various departments.
5.Efficiency
A good costing system should be helpful to improve the efficient and effectiveness of different factors production.
METHOD OF COST ACCOUNTING
There are two types of costing method are used usually
1.Specific Order costing
2.Operation Costing
1.Specific Order costing
(A)Job Costing
The Costing method which is used to find out the cost of each job or work order is known as job costing.It is used in different industries like -:
Printing Costing
Repair Shop
Decoration
Painting etc
(B)Batch Costing
The Costing method which is used for the ascertainment of cost of batch having identificial product is known as batch costing.It is used indifferent industries like.
Toy Manufacturing industries
Readymade Garments
Shoes Manufacturing industries
(C)Process Costing
The Costing method which is used to findout the cost of a product that passes through various stages to become a final or finished product is called Process Costing.It is used in different industries like:
Textile Industries
Paper industries
Sugar Manufacturing Industries
Chemical Industries
(D)Contract Costing
The costing method which is used to find out the cost of each construction or engineering work is called Contract Costing.It is used a different industries like
Construction of building
Construction of bridge
Construction of Dan
(E)Unit Costing/Single Output
The Costing method which is used to know the cost of a product where production is continuous and unit produced are indentical is called Unit Costing.It is used in different industries like
Cement Manufacturing industries
Brickes Manufacturing industries
Mining
Diaries
Flour Mill
Shop Manufacturing
(F)Multiple/Composite Costing
The process of applying two or more costing method combinedly to ascertain the cost of a product is called Multiple or Composite Costing.It is used in different industries like:
Motor Vehicle Manufacturing
Aircraft Manufacturing
Automobiles industries
Television Manufacturing
(G)Operating /Service Costing
The costing method which is used in the industries providing service or operate facilities is called operating costing.It is used industries like
Hospital
Banks sector
Power House
Hotels
School etc
Washing Machine Manufacturing
(H)Firm Costing
The costing method which is used to calculate total cost and cost per unit of various farming activities is called firm costing.It is used in industries like
Agriculture
Horticulture
Pisciculture
ADVANTAGES OF COST ACCOUNTING
1.It records both Monitary and Non Monitary transaction for the mangement.
2.It provides some usefull and important information to the mangement.
3.It helps to know the total cost and cost per unit.
4.The closing stock Valued at Cost price on it.
DISADVANTAGES OF COST ACCOUNTING
1.Cost accounting isn’t an exact science.
2.Cost accounting doesn’t follow uniform procedure and method.
3.Cost accounting is based on estimation and imagination.
4.It is very expensive for organisation or industries to maintain on day to day business.
