What do you mean by cost accounting

What do you mean by cost accounting?

Meaning of cost:- Cost means price paid for something. But in the management terminology, Cost refers to the expenditure not a price. Thus cost represents a sacrifice of values for attaining something.

Definition According to the cost and management accountants, London, As “The amount of expenditure incurred on a given thing”.

Example:- For Manufacturing of Clothes, The expenditure incurred on purchase of cotton, wages paid to weavers, salary paid to factory manager, supervisor and Depreciation of machinery in factories are the example of Cost items.

Meaning of Costing:- Costing is the method of ascertaining the cost of operations of manufacturing goods and services in the industry. 

Definition of Costing According to Weldon:- Cost is the recording, allocation and classifying the expenditure for the determination of costs of products or services.

However, there are different methods for ascertaining cost in different industries based on the nature of operations.

Cost Accountancy :- Cost Accountancy is the application of principles of methods and techniques of costing and cost accounting. It is the art and science through which a cost accountant practices to have cost control and cost ascertainment. It contains the presentation of information for the purpose of managerial decision making.

Scope of Cost Accountancy :- The scope of cost accountancy is wide and includes the following. What do you mean by cost accounting

• Cost Ascertainment
• Cost Accounting
• Cost Control
• Cost Audit

Now let\’s study the question: what do you mean by Cost Accounting? 

COST ACCOUNTING

Cost Accounting:- Cost Accounting is the process of accounting to record the costs of operations of the business in order to ascertain the total cost and per unit cost of services and products. Cost accounting is helpful to the management where a company is spending its money. How much money is being lost to earning.

Cost accounting is useful for cost control and improving the efficiency of management. What do you mean by cost accounting

Definition According to the Institute of Cost and Management Accountants as “The techniques and process of ascertaining costs”. Cost accounting involves the recording of costs for the purpose of ascertaining and controlling the costs of products and services.

In other words:- Cost accounting is the process of recording, classifying and analysing the expenditure for the purpose of product costing or service costing. So it is useful for ascertaining profitability planning and cost control.

There are some costing methods like Budgeting, Standard Costing, Marginal costing and Material control techniques that are widely used by many businesses these days.

Definition according to the Gordon, Cost Accounting is defined as “The body of concepts, methods and procedure used to measure, analyse, estimate the costs, profitability and performance of individual, products, departments and other segments of a company operations for internal and external use or both, and report to the externally interested parties”.

This definition is simple which covers all important features of the cost Accounting system.

However, These three terms as “ Costing”, “Cost Accounting”, “Cost Accountancy” are different from each other. Which are considered different by various authorities of cost Accountants.

Features of Cost Accounting

The main features of cost accounting are as following

1. Cost accounting is the special branch of accounting which deals with the ascertainment of cost of products and services.
2. Cost Accounting is both Art and Science.
3. Cost Accounting also follows a double entry system like Financial Accounting.
4. Costs Accounting involves mainly recording, classification, analysis and ascertainment of costs.
5. Cost Accounting determines cost as total cost and per unit cost.
6. Cost Accounting provides appropriate data for determining the selling price of products and services as well as determining the quotation price and tender price.
7. Cost Account provides essential data for the purpose of exercising effective control over costs.
8. It provides data to the management for use in forward planning and decision making processes.
9. Cost control provides many techniques to the management for the controlling material in the business.
10. Cost accounts are used for making the budget for decreasing costs of products and services.

Now, we can understand the concept of cost accounting and the questions: what do you mean by cost accounting? And importance concerned with the business for ascertaining and controlling the costs. What do you mean by cost accounting

conclusion:- Cost Accounting deals with the recording, classification and ascertaining costs for different products, processes, segments, centres and services of the business. Which represents total cost and per unit cost for the purpose of controlling costs as per desired target. It is also helpful to determine the appropriate price for selling products in the market. What do you mean by cost accounting

There is one more important question concerned with the cost accounting as following.

What are the 4 types of costs?

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What do you mean by cost accounting