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.
Saturday, 11 June 2011
Relationship between Statistics and Cost Accounting:
Statistics is the science that includes collection, presentation, analysis and interpretation numerical information. Cost accounting is involved in completion of information for management purpose. So, Accounting to the former meaning a cost accountant is a statistician and some time more that that because he or she is to express cost concept in several way according to the needs of management, assists cost control, to give financial advice, to fix selling price etc.
Relationship between Economics and Cost Accounting:
Economists are interested in the affairs of industries or nations. Accountants (cost accountants) are interested only in the affairs of individual firms. Economists may macro and micro. New techniques of economic analysis with special reference to business decision have been developed. Accountants are also concerned with opportunity cost, marginal cost, differential cost etc, which are some of the subject matter of the economics. Economists and accountants both use mathematical tools of analysis like operation research with different techniques help any individual firm or government in making decisions as to the best allocation of resources.
It is a fact that economist and accountants work in different dimension. Economists rely in many cases on the information supplied by accountants. Economist now a days are becoming more and more interested in topics of accounting.
A concept of profit advocated by economists widely differs from that advocated by accountants.
Accountants’ value fixed assets at historical cost less depreciation. Accountants do not have any objection to the economists view that asset have value only when they contribute to the future income. So, assets may be revalued so that they can represent their true worth.Objectives of Cost Accounting:
- To determine cost
- Planning of cost – needs future and estimated information.
- Controlling of cost- cost reduction through evaluation of performance.
Financial Accounting vs. Cost Accounting:
- In cost accounting all information are not relevant but in financial accounting all information are relevant. Cost accounting only represent relevant information.
- Financial Accounting deals only with historical costs. Cost accounting deals not only with historical cost but also actual and future cost.
Definition of Cost Accounting:
- 01. Cost accounting is primarily concerned with the accumulation and analysis of information relevant for internal use by managers for planning, controlling and decision making.
- 02. Cost Accounting is a technique or method for determining the cost of a project, process or thing used by majority of the legal entities in a society or society or specifically prescribed by an authoritative accounting group. – By National Association of Accountants Statement on management accounting: management accounting techniques. Statement no. 02.
Tuesday, 11 January 2011
Basis of Accounting
Method used to determine when revenues and expenses (with associated assets and liabilities) are recognized in the accounts of a firm, and reported in its financial statements. In accrual basis accounting, for example, revenues are recognized when earned and expenses are recognized when incurred, whether or not any cash is received or paid. In cash basis accounting, however, revenues and expenses are recognized only when cash is received or paid, irrespective of the timing of actual sales or purchases.
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