Cost Accounting:
Cost accounting is concerned with recording, classifying and appropriate allocation of expenditure for the determination of the costs of products or services and for the suitably arranged data for purposes of control and guidance of information to management for decision making.
Cost means "the price paid for something".
Objectives and Functions of Cost Accounting:
To ascertain the cost per unit of the different products manufactured by a business concern.
To provide a correct analysis of cost both by process or operations and by different elements of cost.
To disclose sources of wastage whether of material, time or expense or in the use of machinery, equipment and tools and to prepare such reports which may be necessary to control such wastage.
To provide requisite data and serve as a guide for fixing prices of products manufactured or services rendered.
To ascertain the profitability of each of the products and advise management as to how these profits can be maximized.
To exercise effective control if stocks of raw materials, work-in-progress, consumable stores and finished goods in order to minimize the capital locked up in these stocks.
To reveal sources of economy by installing and implementing a system of cost control for materials, labour and overheads.
To advise management on future expansion policies and proposed capital projects.
To present and interpret data for management planning, evaluation of performance and control.
To help in the preparation of budgets and implementation of budgetary control.
To organize an effective information system so that different levels of management may get the required information at the right time in right form for carrying out their individual responsibilities in an efficient manner.
To guide management in the formulation and implementation of incentive bonus plans based on productivity and cost savings.
To supply useful data to management for taking various financial decisions such as introduction of new products, replacement of labour by machine etc.
To help in supervising the working of punched card accounting or data processing through computers.
To organize the internal audit system to ensure effective working of different departments.
Scope of Cost Accounting:
There are lots of techniques, procedures, process and programmes are used in cost accounting for calculating cost and its control.
But basically, we divide its scope within three major parts:
Cost ascertainment
Cost record
Cost control
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