Cost Accounting

Dr. Mohiy Samy El-Shabasy

Associate Professor, Accounting Department
Faculty of Commerce and Business Administration
Helwan University

lectures in (Cost Accounting)

2023

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 lecture (1)

(1) WHAT IS Accounting?

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(1) WHAT IS Accounting?
At the beginning, Accounting is a science and
an Art,
It has gone through many changes that affected it, So, the
definition of accounting can be summarized in three
definitions that represent the stages of its development:
1- Accounting is the recording, classification, summarization,
and tabulation of financial operations to provide information
that serves users.
2- Accounting is the recognition, measurement, and disclosure
of financial operations to provide information to Make
decision.
3- Accounting is an information system that depends on the
measurement and processing of financial operations to provide
appropriate and relevant information that helps the decision
maker to rationalize his decisions.

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(2) WHAT IS A Cost?

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 (2) WHAT IS A Cost?

Cost is defined as sacrifice Economic resources to

achieve a particular purpose such as obtain assets or
produce a product or service.
Or
Cost is the amount of resource given up in
exchange for some goods or services.
The resources given up are money or money’s
equivalent expressed in monetary units.

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(3) WHAT IS A Cost Accounting?

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 (3) WHAT IS A Cost Accounting?

Cost accounting is a branch of accounting concerned with

providing information on costs to assist management in
making planning and control decisions.
Or

Cost accounting aims to measure and control cost

Or
defined as "A concepts, principles, systems and methods
related to measurement, analysis control, management cost per
unit in order to provide information that helps management in
making decisions"
Based on this definition, cost accounting is
characterized by the following:

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 A
Science

Cost
Accounting

Information
A
Profession
system

A) Cost accounting as a science:

Cost accounting depends on a group of concepts, assumptions, principles,
and objectives that covering and organizing the work of the cost accountant,
such as the concepts of cost.
B) Cost accounting a profession:
Cost accounting depends on application systems, standards, methods, tools
and procedures in costing measurement, controlling, reduction, management
by the cost accountant in the entity.
C) Cost accounting an information system:
Cost accounting is an information system includes inputs; processing and
outputs, as it depends on historical and estimation data for providing the
information to assist the management in planning and control decisions.

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(4) WHAT IS A Cost Accounting objective?

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(4) WHAT IS A Cost Accounting objective?
The main objectives of cost accounting can be summarized as follows:

Cost
Measurment
Providing
information
Cost
for
Controll
managerial
decisions
Cost
Accounting
Objectives

Profitability
Cost
& Efficiency
Management
Measurment

Cost
Reduction

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1- Cost measurement:

The first objective of cost accounting is to find out cost of a

product, process, or service. The other objectives which have
been mentioned hereafter scan be achieved only when the costs
have been measurement.

Cost measurement is the process of determining,

recording, classifying, and allocating the costs of material,
labor, and manufacturing overhead incurred and absorbing
their costs in products, services, jobs, departments, or
processes.

2-Cost controlling:

Cost controlling is the process of comparing actual costs with

the predetermined costs in the budget to calculate the variances
and reporting for these variances immediately to management
so that action may be taken to prevent recurrence of
undesirable variances from predetermined costs.

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3- Cost reduction:

cost reduction means performing the same thing at lower

costs than predetermined costs.

4- Cost management:

Cost management is the process of studying the costs of the

product life cycle and applying systems and methods of cost
engineering to reach the target costs according to the desires of
customers and market variables

5- Profitability & Efficiency measurement:

Cost accounting aims to measuring the profits or losses of

each activity according to the requirements of management.

6- Providing information for Managerial Decision Making:

Cost accounting will provide information to assist

management in planning and controlling decisions, such as:
(Add or drop product, Make, or buy Product Parts).

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