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Introduction To Cost Concepts

Cost accounting is a branch of accounting that provides financial information to internal managers to help control costs and guide decision making. It involves classifying, recording, and allocating costs to determine the costs of products, services, or cost objects. Cost accountancy applies costing principles, methods, and techniques to ascertain costs and profitability. Cost accounting differs from financial accounting in its purpose, treatment of costs, periodicity of reporting, and focus on efficiency. Costs are classified in various ways including by element, function, traceability, variability, controllability, association with products or periods, and for planning and control. Cost units and cost centers are used to accumulate and assign costs for management analysis and decision making.

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143 views12 pages

Introduction To Cost Concepts

Cost accounting is a branch of accounting that provides financial information to internal managers to help control costs and guide decision making. It involves classifying, recording, and allocating costs to determine the costs of products, services, or cost objects. Cost accountancy applies costing principles, methods, and techniques to ascertain costs and profitability. Cost accounting differs from financial accounting in its purpose, treatment of costs, periodicity of reporting, and focus on efficiency. Costs are classified in various ways including by element, function, traceability, variability, controllability, association with products or periods, and for planning and control. Cost units and cost centers are used to accumulate and assign costs for management analysis and decision making.

Uploaded by

vijisha4
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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INTRODUCTION TO COST CONCEPTS

Introduction
Financial Accounting
Preparation of Profit & Loss A/c and Balance Sheet. Provide financial Information to outsiders.

Cost Accounting
Cost Accounting is a branch of accounting and has been developed due to limitation of financial accounting.

Cost Accounting
Cost Accounting is the Classifying, recording and appropriate allocation of expenditure for the determination of expenditure for the determination of the cost of products or services, and for the presentation of suitably arranged data for purpose of control and guidance of Management.

Cost Accountancy
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.

Scope of Cost Accountancy


Cost Ascertainment Cost Accounting Cost control

Difference between Financial Accounting & Cost Accounting


Purpose Form of accounts Stock Valuation Reporting of costs Periodicity of Reporting Fixation of Selling price Figures Recording Relative Efficiency

COST
Cost is the amount of resources given up in exchange for some goods are services.

CLASSIFICATION OF COST
I Nature or Element 1. Material 2. Labor 3. Overheads II By Functions 1. Administrative Costs 2. Selling and Distribution Costs
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III By Traceability 1. direct and 2. indirect IV By Variability 1. Fixed Costs 2. Variable Costs 3. Semi-Variable Costs V By Controllability 1. Controllable Costs 2. Uncontrollable Costs VI By Normality 1. Normal Cost 2. Abnormal Cost VII Financial Accounting Classification 1. Capital and 2. Revenue VIII By Time 1. Historical Costs 2. Predetermined Costs
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IX By Association with Product 1. Product Cost 2. Period Cost X According to Planning and Control 1. Budgeted Costs 2. Standard Costs XI Managerial Decisions 1. Marginal Cost 2. Out of Pocket Cost 3. Differential Cost 4. Sunk Cost 5. Imputed (or Notional) Cost 6. Opportunity Cost 7. Replacement Cost 8. Avoidable and Unavoidable Cost
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XII 1. 2. 3. 4. 5. 6.

Other Types of Costs Future Costs Programmed Cost Joint Cost Conversion cost Discretionary Cost Committed cost

Cost Units
Unit of quantity of output in relation to which costs are ascertained or expressed Cost Unit includes Products, activities, departments, number of patients treated, sales regions, etc. For Example, if a factory produces motor cars then the cost unit would be a motor car because the costs are all incurred in producing motor cars

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Cost Centers
It is a smaller segment of activity or area of responsibility for which costs can be accumulated. Responsibility in a cost center is restricted to costs only.

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Thank you
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