What is Cost Accounting?

What is Cost Accounting?

Cost Accounting is defined as how costs of products or services are ascertained and controlled. Cost Accounting deals with all those areas that remain unturned by financial accounting, it is a part of management accounting that helps to make informed business decisions, and rather than only translating financial health to stakeholders. It also provides proper information and data to management for planning and better decision-making. Cost Accounting gathers the cost information which helps the management to understand and account the costs involved in operations, processes, and other activities, which helps the management to determine the cost of the product....

Objectives of Cost Accounting

1. Determining Cost: Cost accounting helps to determine the cost of producing goods or services. It identifies and measures various costs associated with production, such as direct materials, direct labour, and manufacturing overhead....

Scope of Cost Accounting

1. Costing: Costing is the process of ascertainment of costs of any product or service. Costing is governed by several principals, rules and guidelines. Cost can be ascertained by using standard, operation, process cost. When the word accounting is connected to cost, it gets extended to accounting of costs with formal methodology in order to provide better insights to the management....

Users of Cost Accounting

I. Internal Users of Cost Accounting...

Limitations of Cost Accounting

1. Expensive: Cost Accounting is an expensive task, as it will require hiring of additional workforce other than one who manages financial accounts and cost accounting needs wide knowledge of costing aspects....

Difference Between Cost Accounting and Financial Accounting

Basis Cost Accounting Financial Accounting Objective Cost accounting provides with ascertainment of cost for the purpose of strategic decision making and deciding the price of product or service. Financial accounting provides information about financial performance of any business to its stakeholders. Recording of Data It records both historical and pre-determined costs. It records historical data. Main Analysis It provides the user with basic cost details like process cost, operation cost, job cost, etc. It provides the profit and loss of the business, either individually or as a whole. Timeline of Preparation Cost records are prepared as an when required by management, authorities or stakeholders. Financial records are prepared every year, after the end of financial year. Users of Information Main users are internal management, but sometimes might be required by stakeholders and government authorities. Creditors, shareholders, government authorities, banks, etc. Set of Guidelines Followed Cost principals, cost rules and cost standards are followed while drafting cost records. Accounting standards or Indian accounting standards are followed. Valuation of Stock Valuation is always done at cost. Valuation of stock is based on cost or net realisable value whichever is lower....