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Introduction to Costing

COSTING is the techniques and processes of ascertaining costs.

COST ACCOUNTING may be regarded as a specialized branch of accounting which involves classification, accumulation, assignment and control of costs:

C.I.M.A. London defines cost accounting as "the establishment of budgets, standard costs and actual costs of operations, processes, activities or products, and the analysis of variances, profitability or the social use of funds."

COST ACCOUNTANCY has been defined as 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. It includes the presentation of information derived there from for the purpose of managerial decision making.

OBJECTIVES OF COST ACCOUNTING
(1) To analyze and classify all expenditures with reference to the cost of products and operations.

(2) To arrive at the cost of production of every unit, job, operation, process, department or service and to develop cost standard.

(3) To indicate to the management any inefficiencies and the extent of various forms of waste, whether of materials, time, expenses or in the use of machinery, equipment and tools. Analysis of the causes of unsatisfactory results may indicate remedial measures.

(4) To provide data for periodical profit and loss accounts and balance sheets at such intervals, e.g., weekly, monthly or quarterly, as may be desired by the management during the financial year, not only for the whole business but also by departments or individual products. Also, to explain in detail the exact reasons for profit or loss revealed in total, in the profit and loss account.

(5) To reveal sources of economies in production having regard to methods, types of equipment, design, output and layout. Daily, weekly, monthly or quarterly information may be necessary to ensure prompt and constructive action.

(6) To provide actual figures of cost for comparison with estimates and to serve as a guide for future estimates or quotations and to assist the management in their price-fixing policy.

(7) To show, where standard costs are prepared, what the cost of production ought to be and with which the actual costs which are eventually recorded may be compared.

(8) To present comparative cost data for different periods and various volumes of output and to provide guidance in the development of business. This is also helpful in budgetary control.

IMPORTANCE OF COSTING
Various advantages derived by the management from a good system of costing are as follows:
1. Cost accounting helps in periods of trade depression and trade competition - In periods of trade depression, the organization cannot afford to have losses which pass unchecked. The management must know the areas where economies may be sought, waste eliminated and efficiency increased.

2. Cost accounting aids price fixation - Although the law of supply and demand to a great extent determines the price of the article, cost to the producer does play an important role. The producer can take necessary guidance from his costing records in case he is in a position to fix or change the price charged.

3. Cost accounting helps in making estimates - Adequate costing records provide a reliable basis for making estimates and quoting tenders.

4. Cost accounting helps in channelizing production on right lines - Proper costing information makes it possible for the management to distinguish between profitable and non-profitable activities. Profits can be maximized by concentrating on profitable operations and eliminating non-profitable ones.

5. Cost accounting eliminates wastages - As cost accounting is concerned with detailed break-up of costs, it is possible to check various forms of wastages or losses.

6. Cost accounting makes comparisons possible - Proper maintenance of costing records provides various costing data for comparisons which in turn helps the management in formulation of future lines of action.

7. Cost accounting provides data for periodical profit and loss account - Adequate costing records provide the management with such data as may be necessary for preparation of profit and loss account and balance sheet at such intervals as may be desired by the management.

8. Cost accounting helps in determining and enhancing efficiency – Losses due to wastage of materials, idle time of workers, poor supervision, etc., will be disclosed if the various operations involved in the production are studied carefully. Efficiency can be measured, costs controlled and various steps can be taken to increase the efficiency.

9. Cost accounting helps in inventory control - Cost accounting furnishes control which management requires in respect of stock of materials, work-in-progress and finished goods.

JYOTI
CS FOUNDATION-75%
GURMEET KAUR
BCOM A/C- 85% & F.M- 80%
BHAWIKA XI
A/C- 95% & EC0- 99%
PIYUSH
B.COM TAX-85%
KANIKA
XII ECO-90% & A/C- 85%
POOJA ARORA
BCOM TAX-85%
DIVANSHU
BCOM F.M- 85% & COST A/C- 80%
SHAGUN
CS FOUNDATION-80%
JASPREET
B.COM COST A/C- 100%
ANKUSH
CS FOUNDATION-75%
SONIA
B.COM COST A/C-90%
SURBHI RAJAN
XII ECO-85% & A/C-80%
VEDANT GAUTAM
CS Foundation AIR 17