COST ACCOUNTING

WHAT IS COST ????

OBJECTIVES
Classify Record Allocate Appropriation of expenses incurred

DIFFERENCE B/W COST A/C ING & MANAGEMENT A/C ING Management A/cing Cost A/c ing
1.It is concerned more with allocation , 1.It is concerned with impact & effect distribution, ascertainment & a/c ing aspects of costs. aspect of cost. 2. Its data serves as a base to which 2. The mgmt. a/c ing data is derived the tools & techniques of mgmt. a/c ing both, from the cost a/cs & financial can be applied to make it more a/cs. purposeful & mgmt. oriented. 3.The primary aspect of cost a/c ing is to deal with collection ,analysis,relevance,interpretation & presentation for various problems of mgmt. 3.The main thrust in mgmt. a/cing is towards determining policy & formulating plans to achieve deserved objective of mgmt.Mgmt a/cing makes corporate planning & strategy effective & meaningful.

4.It does not include financial a/cing & 4.It includes both financial a/cing as has nothing to do with tax a/cing. well as cost a/cing. It also embraces tax planning & tax a/cing.

Classification of Costs
Costs are generally classified into variety of ways. The important classification of cost are as follows:1. By nature 2. In relation to cost centre 3. By functions and activities 4. By time 5. In respect of Management decision making 6. By nature of production process 7. By behavior

1. Classification by natur e
Material Costse.g. Cost of procurement, freight inwards, taxes & duties,insurance,etc. Labor Costs 1. Monetary benefits payable immediately 2. Monetary benefits after some time in future 3. Non-monetary benefits Expenditure Costs-

2. In r elation to cost centr e

DIRECT LABOUR INDIRECT DIRECT

DIRECT MATERIALS

DIRECT LABOUR

DIRECT EXPENSES

INDIRECT LABOUR

INDIRECT EXPENSES

INDIRECT MATERIALS PRIME COST OVERHEADS

3.By functions and activities

PRODUCTION COSTS ADMINISTRATION COSTS SELLING COSTS DISTRIBUTION COSTS R& D COSTS

4.By time
HISTORICAL COSTS PRE-DETERMINED COSTS STANDARD COSTS ESTIMATED COSTS

5. In respect of Management decision making

MARGINAL COSTS DIFFERENTIAL COSTS OPPORTUNITY COSTS REPLACEMENT COSTS RELEVANT COSTS IMPUTED COSTS SUNK COSTS NORMAL COSTS ABNORMAL COSTS AVOIDABLE COSTS UN AVOIDABLE COSTS PRODUCT COSTS PERIOD COSTS TRACEABLE COSTS COMMON COSTS CONTROLLABLE COSTS

SHORTRUN COSTS LONG RUN COSTS PAST COSTS FUTURE COSTS OUT OF POCKET COSTS BOOK COSTS SHUTDOWN COST ABANDONMENT COSTS URGENT COSTS POSTPONABLE COSTS SPECIFIC & COMMON FIXED COSTS COMMITED FIXED COSTS DICRETIONARY FIXED COSTS ENGINEERED COSTS

MANAGED COSTS CAPACITY COSTS PROGRAMMED COSTS

6. By nature of production BATCH COSTS process

PROCESS COSTS OPERATION COSTS OPERATING COSTS CONTRACT COSTS JOINT COSTS

7.By behavior
VARIABLE COSTS FIXED COSTS SEMI-VARIABLE/ SEMI-FIXED COSTS