Professional Documents
Culture Documents
DR. N.K.GUPTA
What is Accounting
Accounting is the art of recording,
classifying and summarizing in a
significant manner and in terms of
money transactions and events which
are in part at least, of a financial
character and interpreting the result
thereof.
Different types of Accounting
1. FINANCIAL ACCOUNTING: In financial
Accounting daily transactions are recorded
through entries, ledgers are prepared, after
a certain period trial balance is prepared
and finally the final accounts.
2. MANAGEMENT ACCOUNTING :It is used by
Management to control Expenses, to
planning purpose and for the purpose of
decision making so that it may maximize
the profit of business.
1. TAX ACCOUNTING: Though, final
accounts show the income or
loss of the business even then
due to the reason of different tax
structures and Acts prevailing in
every country, tax accounting is
necessary.
2. COST ACCOUNTING: In it, all
expenses whether related to
production or sale are analyzed
so that per unit cost in
production may be known.
Definition of Cost Accounting
VALUATION OF STOCK
In financial accounts stocks are valued at cost
or market value whichever is less while in cost
accounting stocks are valued mostly at cost.
Limitations of Final accounts
Lack of control over raw materials.
Advantages to labourers
Advantages to Customers.
Advantages to Nation.
Different types of Cost Accounting
Uniform costing Method
Contract Costing
Process Costing Method
Departmental Costing
Operating Cost System
Multiple Cost System
Batch Costing
Standard Costing System
Marginal Costing System
Characteristics of Ideal System of
Cost Accounting
Simplicity
Economical
Favorable to business
Elasticity
Accuracy and clean Presentation
Proper Classification and Analysis
Reconciliation
Methods of
calculating unit cost
Unit Costing
“Single or output cost system is used
in businesses where a standard
product is turned out and it is desired
to find out the cost of a basic unit of
production”
– J.R.Batliboi
Objects of Unit Costing
To determine per unit cost and total
cost of production.
To know detailed per unit cost
Calculating the variation in cost and
determining the reasons for variation
and comparing.
To decide the price of production
The Expenditure, which has been incurred
upon production for a period is extracted
from the financial books and store records,
and set out in memorandum statement. If
this period statement is confined to the
disclosure of cost of units produced during
the period, then it is termed as COST
SHEET.
Cost sheet
Statement of cost and statement of profit
Production Account
Trading & profit & loss A/c & Working A/c
COST SHEET
It presents an analytical statement of
expenses of production by which per unit
cost of production and different overheads
are known.
-WALTER W. BIGG
Cost Sheet reveals….
Units produced during particular period
Direct material,direct labor & other
direct expenses incurred during
particular period
Estimation & allocation of different
overheads
Relation between different components
of cost
Comparison of old records
Advantages of Cost Sheet
Per unit and total cost of production
can be known
Determination of SELLING PRICE
Cost control
Cost Sheet & Apparel Industry
Production of fabric
Production of trims
Production of Finished garments
Helps in calculating Price
Price negotiation with buyers
Controlling costs
Basis Cost Sheet Cost A/c
Form Statement Account
Rules Memorandum of Double entry
particulars statement
When Work unfinished Work completed
Use Comparison with Comparison with
Financial account Financial
accounts
Nature Analytical Precise
Use Controlling cost Controlling cost
Elements of Cost and their
Classifications
The total cost is divided into
Material cost
Labour cost
Other expenses
ELEMENTS OF COST
Current Period
Particulars
Total Cost Per Unit Cost
Particulars Rs. Rs .
Op stock of raw materials 12800
Add: Purchases 292000
304800
Less: Closing stock 13600
Cost of material used 291200
Add: Wages 198800
PRIME COST 490000
Add: Works overheads 43736
Particulars
FACTORY COST 533736
Add: Office and general expenses 35524
sirnkgupta@yahoo.com