COST ACCOUNTING

INTRODUCTION: (Parul Malhotra MB100 Sec B)

If we set up a small manufacturing unit, say manufacturing of packing boxes, a problem will arise what price of each box we should quote to the buyer. Many factors are considered while fixing the price of a product such as competitor’s price etc. One of the basic factors is the cost of its production. Cost is essential not only to fix price but also to ascertain the margin of profit. Knowledge of the cost determination is also necessary to keep a check on the cost of product/control on wastages, etc. The accounting used to study the various aspects of cost is known as cost accounting. In this assignment we have explained meaning, advantages and limitations of cost accounting.

Cost incomes the amount of expenditure (actual or notional) incurred on, or attributable to given thing. Cost accounting is concerned with recording, classifying and summarizing cost of product or services, planning, controlling and reducing such costs and furnishing of information to management for decision making. The terms ‘costing’ and ‘cost accounting’ are many times used interchangeably.

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DISCUSSION:(Kanav Bhalla MB41 Sec A)

Advantages of cost accounting:

1. It can also be helpful in measuring feasibility of opening new locations or closing older ones..

2. By weighing the actual costs versus the expected benefit, cost accounting can help a company to avoid launching a product with no real market.(prevent the purchase of unnecessary goods and services)

3. Cost accounting enables to compare costs between different products, time periods.

4. It provides a way to improve policies or strategies about product and prices.

5. It helps in maintaining investments in inventories.

6. It helps in measuring efficiency of company.

7. It helps in reducing losses due to seasonal conditions.

8. It helps in budgeting and checking general accounting.

Limitations of cost accounting:

1. Cost accounting has many benefits but it has drawbacks too. These are as follows:

2. It is based on estimates. actual costs varies from estimated costs.

3. It lacks uniformity. every organization follows different procedure of cost accounting. this leads to different results for each organization,

4. It is very expensive. As it requires lots of clerical work, and maintenance of various cost records.

5. It is not an independent system. it depends upon other accounting systems.

6. It does not include all items of expenses. For e.g. financial charges, interest, discount and loss etc.

7. It is difficult to resolve analysis provided by cost accounting and financial accounting.

8. It is a highly centralized and would be impossible to blame an individual, in case of inefficiency.

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CONCLUSION:(Satbir Singh MB167 Sec C)

1. Cost accounting is the process of determining and accumulating the cost of product or activity.

2. There is a relationship among information needs of management, cost accounting objectives, and techniques and tools used for analysis in cost accounting.

3. Cost accounting has the following main objectives:

Ø Determining selling price

Ø Controlling cost

Ø Providing information for decision-making ACCOUNTANCY

Ø Ascertaining costing profit

Ø Facilitating preparation of financial and other statements

Submitted To:

Mr. Gurdeepak

Submitted By:

Kanav Bhalla (MB 41)

Parul Malhotra(MB 100)

Satbir Singh (MB 167)