In this field also, Cost Accounting is more capable of helping management than Financial Accounting. Cost accounting is the application of accounting and costing principles, methods, and techniques in the ascertainment of costs and the analysis of saving or excess cost incurred as compared with previous experience or with standards. This view is evident from two facts. Cost of closing stock of raw materials, work-in-progress and finished products can easily be ascertained. 1. Practice includes the continuous efforts of a cost accountant in the field of cost accountancy. Cost accounting is considered as a science because it is a body of systematic knowledge relating to not only cost accounting but relating to a wide variety of subjects such as law, office practice and procedure, data processing, production and material control, etc. The process continues till the establishment of its ultimate relationship with cost centre or cost unit. For development of cost accounting profession in India, Government passed an Act viz. (b) Cost accounting is a science and arts both. 13. 2. To indicate to the management any losses or inefficiencies occurring in any form, such as waste—whether of materials, time, expense or in the use of machinery, equipment and tools. Cost Accounting refers to the formal mechanism or a systematic procedure by means of which costs of products and services are computed. Costing makes comparison possible – If the costing records are regularly kept, comparative cost data for different periods and various volumes of production will be available. Cost Accounting Principles and Practice, Jain, I. Moreover, big business requires delegation of responsibility, division of labour and specialisation. Workers have a vital interest in their employer’s enterprises and the industry in which they are employed. An analysis of the above comprehensive definitions reveals some of the important functions of Cost Accounting. Costing refers to the technique and process of ascertaining costs. To advise the management on the profitability of present or new lines of products, the comparative advantages and disadvantages of different types of production methods, the replacement of manual operations by automation, and other such policy matters which have a direct impact on the development of the company. Next article Cost and Management Accounting and Quantitative Techniques Notes. These problems include the ascertainment of cost control of costs, ascertainment of profitability etc. The Companies Act, 1956 has been amended and provision has been made to make it obligatory to industries to maintain the Cost Accounting records. The system should be able to serve the requirements of management. The methods of purchase and issue of materials should be properly examined and modified, if necessary. Additionally, he is the author of the books "Accounting for Beginners: Interactive Video Textbook" and "What College Didn't Teach You!". a. I.C.MA., London – “It is the process of accounting for cost from the point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centres and cost units”. The exact cause of variance in the profit or loss can be located. Urgent costs are not be postponed. Introduction to Accounting. Cost center refers to a particular area of activity and there may be multiple cost centers in an organization. Installation of Cost Accounting System 13. to control cost of material labour and overheads. Cost means price; the price that is paid for something. The below given notes will help you for prepare for various competitive examination. By realising importance of Cost Accounting techniques, benefits available to the industries, Government of India has made compulsory the maintenance of cost accounts to most of the industries in the corporate sector. Evolution 4. But can only give information on the same. Adequate costing data help management in reaching certain important decisions such as, whether hand labour should be replaced by the machinery or not; whether a particular product line should be discontinued or not etc. Aids in price fixation – Though economic law of supply and demand and activities of the competitors, to a great extent, determine the price of the article, cost to the producer does play an important part. The various advantages derived by management on account of a good costing system can be put as follows: i. Costing helps in periods of trade depression and trade competition – In periods of trade depression the business cannot afford to have leakages which pass unchecked. Measurement of Performance and Efficiency: The application of Cost Accounting methods in Indian industries was felt from the beginning of the 20, Nature: Cost Accounting is a Branch of Knowledge, Cost Accounting is a Science, Cost Accounting is an Art and Cost Accounting is a Profession. Account Disable 11. In cost accounting, the amount of resources that is given up in exchange for some goods or services is known as cost. 5. In a process cost center, as the name suggests, different kinds of processes are involved. Art includes the ability and skill with which a cost accountant applies his cost accountancy background and knowledge to the problems of cost ascertainment, cost control and ascertainment of profitability. 11. To help the management in taking vital decisions, such as- (a) make or buy decisions or expand or buy decisions; (b) manual or mechanical operations; (c) different types of machines, or methods or manufacture-costs and profits thereof; (d) investment decisions in regard to capital expenditure; (e) whether to accept others below cost; (f) whether to do with existing machines or improved ones; (g) -whether to do with existing processes or improved ones; (h) whether to shut down or operate at a loss; (i) whether to continue or discontinue an unprofitable product line; (j) whether to introduce a new product line or not; (k) finally, determination of cost-volume-profit relationship. 2. 4. Thus, “ascertained costs provide a measure for estimates, a guide to policy, and a control over current production.”. Be based maintain numerous records, 2 for forecasting and planning future activities. Therefrom for the purposes of management technique consists of the business – cost! 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