COST

ACCOUNTING

Presented By,
Ms. Ekta.
S. Patel,
2 nd Year M.Sc
Nursing
• Cost accounting is a process of collecting,
recording, classifying, analyzing, summarizing,
allocating and evaluating various alternative
courses of action & control of costs.
• Its goal is to advise the management on the
most appropriate course of action based on the
cost efficiency and capability.
• Cost accounting provides the detailed cost
information that management needs to control
current operations and plan for the future.
• Cost accounting is defined as, “the establishment
of budget, slandered cost and actual cost of
operation, process, activities or products and
analysis of variances, profitability or social use of
funds.”
• Cost accounting
is accounting
for
aimed cost
at providing
cost data,
statements
reports and
the
for purpose of
managerial decision
making.
• To control cost by using
various techniques such
as budgetary control,
standard costing and
inventory control.
• To information for decision
provide
making planning to formulate
operative procedures.
and
• To help in directing and controlling
operations.
• To
ascertain
costing
profit.
• To motivate to achieve
the organization’s goals.
• To measures
the
performance of
managers and
sub units
within the
organization.
• To provide immediate information
regarding stock of raw material, semi
finished and finished goods.
• To
facilitate
preparation of
financial
and other
statements.
• To help in
estimation of
cost of
future.
 Cost book keeping:
• It involves maintaining complete record
of all cost incurred from their incurrence
to their change to departments,
products and services. Such recording
is preferable done on the basis of
double entry system.
 Cost system:
• Proper accounting for requires
cost systems and
procedures.
 Cost analysis:
• It involves the process of finding out the
casual factors of actual costs varying
from the budget cost and fixation of
responsibility for cost increase.
 Cost control:
• Cost accounting is of
utilization
information for exercising control.cost It
involves a detailed examination of each
cost in the light of benefit derived from
the incurrence of cost.
 Cost report:
• The ultimate function of cost accounting
is presentation of reports. These reports
are primarily for use by the
management at different levels. Cost
reports from the basis for planning and
control, performance appraisal and
managerial decision making.
To management:
• Help in ascertainment (find out) of cost
of process, activity, by using different
techniques such as job costing and
process costing.
• Aids in price fixation by using demand
and supply, activities of competitors,
market condition to great extend.
• The producer can take necessary
help from costing records.
• Helps in cost reduction by applying cost
reduction programme and improved
methods are tried to reduce cost.
• Elimination of wastage by checking the
form of waste such as time and
expenses.
• Helps in indentifying unprofitable
activities such so that the necessary
corrective action may be taken.
• Helps in checking accuracy of financial
account.
• Helps in fixing selling process.
• Helps in inventory control.
• Helps in estimate.
To employees:
• Employees have an interest in which
they are employed. An efficient costing
system benefits employees through
incentives plan in their enterprises.
• It is extensive
because
allocation analysis,
absorption and
require
overheads
considerable
amount of additional
work.
• The result shown by cost accountant
differ from those shown by financial
account.
• It involves
duplication
of work. (Many
industrial units
function effectively
and the cost
control
effectively with
financial accounting.
the
Preparing cost
accounting is
unnecessary for them
and it involves
duplication of
accounting work.)
 COST
EFFECTIVENESS
-
• Cost-effectiveness analysis is often used in
the field of health services, where it may be
inappropriate to monetize health effect.
• Typically the CEA is expressed in terms of a
ratio where the denominator is a gain in
health from a measure (years of life,
premature births averted, and sight-years
gained) and the numerator is the cost
associated with the health gain.
• Hülsmann defines cost-
effectiveness as “the most
efficient way to achieve a
set goal.” Essentially, it
expresses a balance
between attempts to keep
costs to a minimum while
maximising
the outcomes/outputs of
educational an
institution programme. or
• Cost effectiveness is defined as, “the
degree to which something is effective
or productive in relation to its cost.”
Identify the program goal or client outcome to
be achieved.

Identify at least 2 alternatives means

of achieving the desired outcomes..

Collect baseline data of client.

Determine the cost associated with each
program activity

Determine the activities each group of clients

will receive.

Determine the client charges after the activities

are completed, combined with the cost, the
amount of activity and outcome information.
 Compare cost outcome information
for each goal to present cost effective
analysis.
 Renewable options
Windows
Heating and cooling
Water heating
Insulation and ventilation
Appliances
Air setting
Lighting
Low cost no cost improvements
and plug load
Understanding
• It is a tool with great potential for the
decision maker so long as he or she
can recognises the difficulty in
determining the true cost and benefits of
various alternatives. This is tool can be
especially useful when trying to be
decide between alternative expenditure
of money.
• CBA = (Benefit/Cost)
• A cost benefit ratio (Z) is defined as the
ratio of the value of benefits of an
alternative to the value of alternative
cost.

• Cost benefit ratio (Z) = PVB/1

• Defining problem
• Adopting research strategies
• Specify audience
• Define perspective
• Specify timeframe work
• Decide the type of study design
• Identify the outcome measures
or variable
• Search for available alternative
• Identify the
type of the cost to be
included in CEA
• Analysis
 Conclusion:
The auditing process is very essential
process in nursing field at hospital or
institutional site. Nurse should require
adequate information regarding audit, cost
accounting and cost effectiveness to carry
out effective administrative and managerial
functions.
Summary