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Cost Accounting-Theory Short Notes
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9/13/24, 9:43 Cost Accounting-Theory Short Notes-ByAM Juraz
Juraz- Enhance Your Commerce Skills With Us
COST ACCOUNTING (B.Com)
Costing
It is the techniques and process of ascertaining costs.
Cost Accounting
It is a specialised branch of accounting which involves
classification, accumulation, assignment and control cost.
General principles of cost accounting
1.A cost should be related to its causes.
2.A cost should be charged only after it has been incurred.
3.The convention of prudence should be ignored.
4.Abnormal costs should be excluded from cost accounts.
5.Past costs not to be charged to future period.
6.Principles of double entry should be applied wherever
necessary.
Objectives of cost accounting
1.To ascertain cost per unit of different products.
2.To provide correct analysis of costs.
3.To ascertain profitability of each product.
4.To advise management on future expansion policies.
5.To provide a perpetual inventory of stores and other materials.
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,9/13/24, 9:43 Cost Accounting-Theory Short Notes-By
AM Juraz
Difference between financial accounting and cost
accounting Financial AccountingCost
Accounting
The purpose of financial The purpose of financial
accounting is to keep accounting is reducing and
complete record of the controlling cost.
financial transactions.
These are accounts of whole It is only a part of whole
business. accounts.
Valuation of stock at cost or Valuation of stock at cost price.
market price.
Financial accounting Cost accounting are
are concerned with concerned with internal
external transactions.
transactions.
Only historical costs Both historical and
are recorded. predetermined costs are
recorded.
It discloses net profit and It discloses profit and loss of
loss of the business. each product, job or service.
Forecasting is not at all possible Forecasting is possible
through
budgeting techniques.
It emphasises the It aims at ascertainment of cost.
measurement of
profitability.
It records only actual cost. It records both actual and
estimated cost.
It does not guide the It provides adequate data for
formulation of pricing policy. formulating pricing policy.
Financial accounts are No specific guidance.
guided by GAAP.
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AM Juraz
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