COST ACCOUNTING

DEFINITIONS -
1. Costing : “Technique & process of ascertaining
costs.”
2. Cost Accounting : “Process of accounting for
cost for ascertaining & controlling costs.”
3. Cost Accountancy : “Application of costing &
cost accounting principles, methods &
techniques for cost control & to ascertain
profitability.”

OBJECTIVES OF COST ACCOUNTING –

 Ascertainment of cost
 Determination of selling price
 Cost control & cost reduction
 Ascertaining profit
 Managerial decision making.
 COST ACCOUNTING
 COST CONCEPTS & TERMS
1. Direct costs
2. Indirect costs
3. Standard cost
4. Marginal cost
5. Differential cost
6. Imputed costs
7. Capitalized cost
8. Opportunity cost
9. Out of pocket cost
10. Shut down cost
11. Sunk cost
12. Relevant costs
13. Period costs
14. Explicit costs
15. Implicit costs
16. Cost allocation
17. Cost absorption
 COST ACCOUNTING
 EVOLUTION OF COST ACCOUNTING-
Phases of Evolution :
A) Prior to Industrial Revolution
B) Advent of Industrial Revolution
C) World War I & II
 VARIOUS REPORTS PROVIDED BY COST ACCOUNTING DEPARTMENT :-
a) Cost sheets
b) Material consumption statements
c) Labour utilization statements
d) Overheads comparision & justification statements
e) Sales details
f) Reconciliation of profits
g) Inventory cost
h) Labour turnover
i) Research & development expenditure & comparision
 COST ACCOUNTING

IMPORTANCE OF COST ACCOUNTING TO BUSINESS-

1. Control of material cost

2. Control of labour cost
3. Control of overheads
4. Measuring efficiency
5. Budgeting
6. Price determination
7. Curtailment of cost
8. Decision making

 ADVANTAGES OF COST ACCOUNTING SYSTEM

 ESSENTIALS OF A GOOD COST ACCOUNTING SYSTEM
 COST ACCOUNTING
 ELEMENTS OF COST-

ELEMENTS OF COST

OTHER EXPENSES
MATERIAL COST LABOUR COST

DIRECT INDIRECT DIRECT INDIRECT DIRECT INDIRECT

 Indirect costs can be termed as overheads.

 Four main types of overheads are :
1. Production overhead
2. Administration overhead
3. Selling overhead
4. Distribution overheads
 COST ACCOUNTING
CLASSIFICATION OF COSTS-
1. BY NATURE:- material, labour, other

2. BY FUNCTION:- production, selling,

distribution, administrative, research,
development, pre production, conversion
3. BY VARIABILITY:- fixed, variable, semi
variable
4. BY CONTROLLABILITY:- controllable,
uncontrollable
5. BY NORMALITY:- normal, abnormal
 COST ACCOUNTING
TYPES OF COSTING :
 Uniform
 Marginal
 Standard
 Historical
 Direct
 Absorption

METHODS OF COSTING :
 Job
 Batch
 Contract
 Single / Output
 Process
 Operating
 Multiple
THANK YOU