Meaning:
Cost Accounting: Cost accounting is the classifying, recording and appropriate
allocation of expenditure for the determination of the costs of products or services.
Cost Accounting is a business practice in which we record, examine, summarize,
and study the company’s cost spent on any process, service, product or anything
else in the organization. This helps the organization in cost controlling and making
strategic planning and decision on improving cost efficiency. It includes the
ascertainment of the cost of every order, job, contract, process, service or unit as
may be appropriate. It deals with the cost of production, selling and distribution.
Definition of cost accounting:
Cost Accounting may be regarded as “a specialized branch of accounting which
involves classification, accumulation, assignment and control of costs.”
The costing terminology of C.I.M.A, London defines cost accounting as “the
process of accounting for costs from the point at which expenditure is incurred or
committed to the establishment of its ultimate relationship with cost centers and
cost units. In its widest usage, it embraces the preparation of statistical data, the
application of cost control methods and the ascertainment of profitability of
activities carried out or planned”.
Wheldon defines cost accounting as “classifying, recording and appropriate
allocation of expenditure for determination of costs of products or services and for
the presentation of suitably arranged data purposes of control and guidance of
management”. It is thus a formal mechanism by means of which costs of products
or services are ascertained and controlled.
Objectives of Cost Accounting:
Cost accounting aims at systematic recording of expenses and analysis of the same
so as to ascertain the cost of each product manufactured or service rendered by an
organization. Information regarding cost of each product or service would enable
the management to know where to economize on costs, how to fix prices, how to
maximize profits and so on. Thus, the main objectives of cost accounting are the
following.
1. To analyse and classify all expenditure with reference to the cost of products and
operations.
2. To arrive at the cost of production of every unit, job, operation, process,
department or service and to develop cost standard.