Cost accounting is concerned with recording, classifying and summarizing
costs for determination of cost of products on services, planning, controlling,
and reducing such costs and furnishing of information to management for
decision making. In short, Cost accounting is that accounting which is responsible for
the calculation of cost of production.
Objectives
of cost accounting
(1)Ascertainment of costs (2)Estimation of costs (3)Cost control (4)Cost reduction (5)Determining selling price (6)Facilitating
preparation of financial and other statement (7)Providing
basis for operation policy
Need
& Importance of cost accounting:
1.Classification and Subdivision of Costs: Cost accounting
classifies cost and income by every possible divisions.
2.Helps in determining selling price: Since CA analyses the cost
of each unit, it gives an idea about the cost of production.
3.Disclosure of profitable products: CA analyses each and every
units, so the most profitable unit an the unit which is making loses can be
easily identified
4.Control of material and supplies: In CA materials are
allocated according in terms of departments, jobs, unit of production or
service. This helps to minimize misappropriation, loses from defective,spoiled,scrap.
5.Control of labour cost: Cost accounting analyses the time
spent by each worker, wage rate of each worker per job etc This enables to find
the cost of labour, measure efficiency or inefficiency of labour force etc.
6.Idleness can be detected: Cost accounting values each single
unit. So it is easy to detect the idleness which result in wastage of time,
money and other resources.
7.Reliable check on general accounts: Cost accounting
facilitates us to check the reliability of general accounts It identifies exact
cost for the decrease/increase of profit/loss.
