Accounting as a language of business is a process of three activities i.e. identifying, recording and communicating economic event of an organization to the interested users. On the other hand bookkeeping is recording the transaction means only a part of accounting.
Monday 14 November 2016
Saturday 11 June 2011
Cost Statement:
Cost Statement (Amount in --)
A
|
Direct Material:
| ||
Direct Material Inventory (Opening)
|
XX
| ||
Add: Direct Material Purchase (Net)
|
XX
| ||
Direct Material Available for consumption
|
XXX
| ||
Less: Direct Material Inventory (closing)
|
(XX)
| ||
Direct Material Consumed
|
XXX
| ||
B
|
Direct Labor
|
XXX
| |
A+B
|
Prime Cost
|
XXX
| |
C
|
Factory or Manufacturing overhead
|
XXX
| |
A+B+C
|
Total Manufacturing Cost
|
XXX
| |
Add: Work In Process inventory (Opening)
|
XXX
| ||
Less: Work in process inventory (closing)
|
(XXX)
| ||
D
|
Cost of Goods Manufactured
|
XXX
| |
Add: Finished Goods Inventory (Opening)
|
XXX
| ||
E
|
Cost of Goods available for sale
|
XXX
| |
Less: Finished Goods inventory (closing)
|
(XXX)
| ||
F
|
Cost of Goods Sold
|
XXX
| |
Add: Administrative Overhead
|
XXX
| ||
Add: Selling and Distribution Overhead
|
XXX
| ||
G
|
Total Cost / Cost of Sales
|
XXXX
| |
Add: Profit
|
XXX
| ||
H
|
Sales
|
XXX
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Brief description of different types of costs:
Variable Cost: Variable cost is the cost which changes with the level of production. Total variable cost is variable but per unit variable cost is fixed.
Fixed Cost: Cost which does not change within a relevant range called fixed cost. Total fixed cost is fixed up to a relevant range but per unit fixed cost is variable.
Semi Variable Cost: When some variable and some fixed cost combined in total cost but individually variable and fixed cost cannot be identified then it is called Semi Variable Cost.
Important Notes: Any finished output is product cost before it is sale. When sold then it is period cost.
Prime Cost = Direct Labor + Direct Material
Conversion Cost= Direct Material + Manufacturing Overhead
Standard Cost: Standard cost is those which should be incurred in a particular production process under normal conditions. Standard Cost is usually concerned with per unit cost of direct material, direct labor and factory overhead.
Budgeted Cost: A Budget is a quantitative expression of management objectives. Budgeted costs are the forecasted cost on a total cost basis rather than on a unit cost basis.
Standard Cost and Budgeted Cost are used by Management to:
· Plan upcoming performance
· Conclude actual performance
Controllable Cost: Controllable cost are those cost which may be directly influence by unit mangers in a given time period.
Non Controllable Cost: are those which are not directly administered at given level of management authorityCost, Expense and Loss
Cost: Cost is defined as the “Value” of the sacrifice made to acquire goods or services measured in monetary terms by the reduction of assets or increase of liability at the time of benefit acquired.
The cost incurred is for present (Expired Cost) or future (Unexpired Cost) benefits.
Expenses: when the benefits of unexpired cost are utilized the cost become expenses. An expense is cost that has given a benefit and is now expired.
Loss: In certain instance the goods or services purchased become value less without having provided any benefit. These costs are called losses and appear on the income statement as a deduction from revenue in the period that the decrease in value occurred.
Relationship between Cost, Expenses and Losses:
Cost
Capital Expenditure Revenue Expenditure| Expired Cost |
| Expenses |
|
| Unexpired Cost |
| Asset |
|
| ||||
Cost accounting vs. Management Accounting:
Cost Accounting is subset of Financial Accounting and Management Accounting. Determination of product cost is the function of Management Accounting.
Distinction between Cost Accounting and Management Accounting:
| Sl. No. | Cost Accounting | Management Accounting |
| 01 | Cost Accounting is a technique or Method for determining the cost of a project, process or product. | Management Accounting is the process of identification, measurement, accumulation, analysis, preparation and communication. |
| 02. | Cost Accounting is confined to the area of product costing, cost and pricing. | The objective of Management Accounting is to have an information pool which will include any and all information that Management may need. |
Relationship between Cost Accounting and Mathematics:
A cost accountant has to employee fundamental mathematical techniques for analysis or synthesis, calculating ratios, observation of ascertainment of variance etc. It does not indicate that cost accounting and mathematics are similar. Mathematics means a vast area of knowledge and not only the fundamental arithmetic or algebra.
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