1. SRI RAMAKRISHNA COLLEGE
OF ARTS AND SCIENCE
D.Ramesh Kumar
Assistant professor
Department of B.Com CA
Sri Ramakrishna College of Arts and Science
Coimbatore
2. Unit-I
1.Cost-Meaning : In business and accounting, cost
is the monetary value that a company has spent in
order to produce a product.
2.Costing:- It is the technique and processes of
ascertaining costs. These techniques consist of
principles and rules which govern the procedure
of ascertaining .
2.Costing Accounting: Costing accounting is a
system of recording and analyzing expenses
incurred by a business, focusing on
understanding the costs associated with
producing goods or providing services.
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Costing Accounting: Cost accounting is the
process of tracking, analyzing and
summarizing all fixed and variable “input”
costs related to the production of a product,
acquisition of goods for sale or the delivery of a
service.
4.Scope of Cost Accounting:
a. Cost identification and Measurement
b.Cost Analysis and Cost behaviour
c. Cost planning and bdgeting
d.Cost control and cost reduction
e.Decision support
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f.Performance evaluation
g.Strategic Cost management
5.Objectives of Cost accounting
a. Determining product cost
b.Cost control and cost reduction
c.Facilitating decision making
d.Performance evaluation
e.Inventory valuation
f.Assisting in strategic planning
g.Ensuring regulaory Compliance
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6. Advantages of Cost accounting
a. Profitability Analysis
b.Efficiency measurement and Improvement
c.Estimation and trending
d.Production planning
e.Cost control and waste reduction
f.Comparative cost analysis
g.Periodic profit determination
h.Efficiency and incentive systems
I.Financial strength and credibility
j.Government Compliance and policy
Formulation
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7.Cost accounting as an aid to Management
a.Cost control and Reduction
b.Pricing decisions
c.Profitabilty Analysis
d.Budgeting and planning
e.Performance Evaluation and bench marking
f.Decision making support
g.Resource allocation
h.Strategic planning
i.Performance measurement
j. Risk management
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8.Limitation of cost accounting
a. Ignore Non – Monetary factors
b. Subjective allocation of overheads
c.Hitorical cost emphasis
d.Focusus on Internal operations
e.Non suitable for small-scale operations
f.Difficulty in allocating joint cost
g.Focusus on historical performance
evaluation
h.Difficulty in masuring intangible assets
i.Ethical Considerations
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9.Characteristics of an ideal costing system
a.Suitability to the business
b.Simple and Informative
c. Flexibility and Accuracy
d. Economical
e. Comparability
f. Minimum clerical work
g.Efficient system of material Control
h.Adequate wage procedure
i. External factors
j.Departmentation of expenses
k.Uniformity of forms
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10.Method of Costing
a. Job costing
b.Contract costing
c.Batch costing
d. Process costing
e.Unit or output Costing
f.Service (or operating) Costing
g.Farm costing
h.Multiple operation Costing
i.Multiple costing
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11. Techniques of costing
a. Uniform costing
b. Marginal costing
c. Standard costing
d. Historical Costing
e. Direct Costing
f. Absorption costing
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13.Costclassification: The important methods
of cost classification are as follows:
1.By nature or elements:
a) Material
b) Labour
c) Expenses
2. By Function (Functional Classification):
a) Production
b) Administration
c) Selling &Distribution
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3.By degree of traceability
a) Direct cost
b) Indirect cost
4. By change in Activity or Volume
a) Fixed Cost
b) Indirect Cost
c) Semi-variable cost
5.By Controllability
a) Controllable
b) Uncontrollable
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6.By Normality
a) Normal Cost
b) Abnormal cost
7.By Relationship with Accounting period
a) Capital Cost
b) Revenue Cost
8.By Time
a) Historical cost
b) Predetermined Cost
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9.Planning and Control
a) Budgeted Costs
b)Standard Costs
10.By Association with the product
a) Product cost
b) Period Cost
11.For managerial decisions
a) Marginal cost
b) out-of –pocket Cost
c) Differential cost
