Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
0Activity
0 of .
Results for:
No results containing your search query
P. 1
MBA CMA UNIT I.doc

MBA CMA UNIT I.doc

Ratings: (0)|Views: 98|Likes:
Published by Naresh Guduru
JNTUH
JNTUH

More info:

Published by: Naresh Guduru on Nov 06, 2013
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOC, PDF, TXT or read online from Scribd
See more
See less

11/06/2013

pdf

text

original

 
Cost and Management Accounting MBA III Sem
UNIT- IINTRODUCTION TO COSTING
“Cost accounting is the process of accounting for costs from the point at which the expenditure is incurred of committed to the establishment of its ultimate relationship with cost units. In its widest sense, it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of the activities carried out or planned is defined as the application of accounting and costing principles, methods and techniques in the ascertainment of costs and the analysis of saving and/or excess as compared with previous experience or with standards.” Institute of Cost and !anagement "ccountants of #ondon“Cost accounting is defined as the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of  profitability. It includes the presentation of information derived therefore for the purposes of managerial decision ma$ing. %heldonCost accounting thus provides information to the management for decision of all sorts. It serves multiple purposes on account of which it is generally indistinguishable from management accounting or so&called internal accounting. %ilmot has summari'ed the nature of cost accounting as “the analysing, recording, standardi'ing, forecasting, comparing, reporting and recommending” and the role of a cost account as that of “a historian, news agent and rophet”
Cost:
 (enerally cost may be explained as the amount of expenditure, actual or notional, relating to a specific thing or activity such as product, )ob, service, process etc. It may also be expressed as a sacrifice which may be defined in the terms of money means it is the amount of resources given up in exchange for some goods and services. Cost and expenses are different but relative terms.%here *costs+ includes the cost of material and labour in addition to expenses, the term expenses is widely applied in financial accounts for various types of historical cost. In cost accounting, it is used for costs other than cost of raw material and wages. o understand the meaning of cost, it is necessary to define themeaning of expenses.
Expenses:
(enerally expenses are called expired costs means those costs which have been used up totally in generating
 
revenue. hey are not capitalised but only shown as expenses in income
 
Cost and Management Accounting MBA III Sem
statement. here are so many
 
examples of expenses such as costs of goods sold expenses, selling expenses and administrative expenses.
 
-or expenses, there is no need to be paid in cash immediately, even a promise to pay could be made f or the
 
 profits received. he manufacturing costs are capitali'ed in the form of finished goods inventory and when
 
a sale is incurred, they expire becoming expenses. he cost of unsold stoc$ which was an asset prior 
 
now converts expenses of cost of goods sold as it has contributed to the generation of revenue. !anufacturing expenses may be expressed as cost because this is included in the cost of fished goods stoc$ which is an asset unless sale is made.
 
-or example, depreciation of a factory machine increases the utility of goods manufactured which are
 
therefore included in wor$&in&progress and finished goods inventory.
 
elling and administrative expenses, when not included in the cost of finished goods stoc$, are deemed only
 
as expenses, not cost asset0 and are deducted from revenues whenever obtained. imilarly, depreciation of 
 
a factory building is a cost but depreciation of an office building is an expense.
 
he term cost itself is without any significant meaning and therefore, it is always advisable to use it with an ad)ective or phrase that will convey the meaning intended such as prime, direct, indirect, fixed, variable,
 
controllable, opportunity, imputed, sun$, differential, marginal, replacement and the li$e. -uture costs are
 
also considered in cost accounting but not in financial accounting.
Loss:
o understand the concept of cost, the term *loss+ should be defined.
 
#oss is lost cost. It is applied to define two accounting events. In financial accounting, it is used to describe
 
a circumstance where expenses exceed revenues for an accounting period, that is, the reverse of net income
 
earnings0 for the accounting period. 1n the other hand, a loss arises due to the cost of an asset being more
 
than the sale proceeds when the asset is sold. his unfavorable event does not arise from a normal business
 
activity but from non&operating transactions or events. his meaning of loss is used to recogni'e the reverse
 
of gain. hat is, if no gain is achieved from the cost incurred or it becomes definite that no benefits accrue,
 
the cost becomes a lost cost, i.e., loss on sale of fixed asset, loss of stoc$ 
Cost :-
Cost can be defined as the expenditure actual or notional0 incurred on or attributable to a given thing. It can also be described as the resources that have been sacrificed or must be scarifies to attain a particular ob)ective. In other words, cost is the amount of resources used for something which must be measured in terms of money. -or example  Cost of preparing one cup of tea is the amount incurred on the elements li$e material, labor and other expenses2 similarly
 
Cost and Management Accounting MBA III Sem
cost of offering any services li$e ban$ing is the amount of expenditure for offering that service. hus cost of production or cost of service can be calculated by ascertaining the resources used for the production or services.
Costing :-
Costing may be defined as *the technique and process of ascertaining costs+. "ccording to %heldon, *Costing is classifying, recording, allocation and appropriation of expenses for the determination of cost of products or services and for the presentation of suitably arranged data for the purpose of control and guidance of management. It includes the ascertainment of every order, )ob, contract, process, service units as may be appropriate. It deals with the cost of production, selling and distribution. If we analy'e the above definitions, it will  be understood that costing is basically the procedure of ascertaining the costs. "s mentioned above, for any business organi'ation, ascertaining of costs is must and for this purpose a scientific procedure should be followed. *Costing+ is precisely this procedure which helps them to find out the costs of products or services.
Cost Accounting :-
Cost "ccounting primarily deals with collection, analysis of relevant of cost data for interpretation and presentation for various problems of management. Cost accounting accounts for the cost of products, service or an operation. It is defined as, *the establishment of  budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds+.
Cost Accountancy :-
Cost "ccountancy is a broader term and is defined as, *the application of costing and cost accounting principles, methods and techniques to the science and art and  practice of cost control and the ascertainment of profitability as well as presentation of information for the purpose of managerial decision ma$ing.+
Objectives of Cost Accounting:
-
1b)ectives of Cost "ccounting can be summari'ed as under 3. o ascertain the cost of production on per unit basis, for example, cost per $g, cost per meter, cost per liter, cost per ton etc.4. Cost accounting helps in the determination of selling price. Cost accounting enables to determine the cost of production on a scientific basis and it helps to fix the selling price.5. Cost accounting helps in cost control and cost reduction.6. "scertainment of division wise, activity wise and unit wise profitability becomes possible through cost accounting.

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->