CONCEPT OF COST ACCOUNTING -CS EXECUTIVE
The term Cost is a very common word in our daily lives. More specifically we used it to signify something that we incur to take in back a benefit, maybe goods or services or anything. As we say everything comes at a cost.
Even in accounting, the concept of cost is referred to as the amount that has to be paid or given to get something in return. In other words, the cost is the number of resources either monetary or otherwise, given in exchange for some goods or services.
DEFINITION - CONCEPT OF COST ACCOUNTING
The Chartered Institute of Management Accountants (CIMA), London defines cost as “the amount of expenditure (actual or notional) incurred on or attributable to a specified thing or activity”.
The concept of cost is wide enough to include anything and everything that is put in to derive an output. Say, for instance, the electronic gadget you are using right now to read this article, be it your smartphone, laptop, tablet, or desktop. When I ask how much did it cost, you ought to tell the price at which you bought it, i.e. the sale price which includes the profit margin of the manufacturer or other middlemen.
The costing we are learning is at the other end of this, where the actual cost of manufacturing of the product i.e. your gadget is going to be studied. This production process for the manufacture of a product or rendering of service involves several expenditures namely, materials (all raw materials), labor (the employee benefit expenses), and other expenses (all other utility, maintenance, selling, Administration, etc). Putting all these expenses into the process the firm demands to ascertain the cost all together of the good manufacturing as well as the cost per unit. It is similar in the case of service providers as well.
Commonly, the cost per unit is arrived by dividing the total expenditure incurred by the total units produced, or the quantum of service rendered. So this is what we are going to learn in this article about costing and cost accounting.
Costing is the set of techniques and processes of ascertaining costs. These consist of principles and rules which govern the method of ascertaining the cost of products or services. The main object of costing is to apportion the respective expenditure and allocate it carefully to selected cost centers, which results in the arrival of the total cost for each respective department, processes or jobs or contracts, etc.
- Cost Accounting
- Objective of Cost Accounting
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