Concept of cost Definition and meaning of Cost As per ICWA India Cost is the price of resources used for the purpose of production of goods or rendering of services As per the Institute of Cost and Management Accountants London ID: 1018672
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1. INTRODUCTION TO COST ACCOUNTING
2. Concept of costDefinition and meaning of Cost As per ICWA, India, Cost is the price of resources used for the purpose of production of goods or rendering of services.As per the Institute of Cost and Management Accountants, London, “Cost is the amount of expenditure, actual or notional, incurred on or attributable to a given thing.”
3. Concept of Costing Costing is a process of determination of cost of product or services.It is referred to as classifying, recording and appropriate allocation of expenditure for determination of the costs of products or services.It consists of rules and principles of ascertainment of costs of a product or service.
4. Concept of Cost AccountingDefinition of Cost AccountingWheldon 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 for purposes of control and guidance of management.”It is the technique and process of ascertainment of costs, which begins with recording of expenses or the basis on which they are calculated and ends with preparation of statistical data.
5. Objectives of Cost AccountingTo ascertain cost of product or services rendered To provide information for planning and control To analyse the data and provide suitable information to management to take deciscions.To provide data for periodical profit and loss account and balance sheetTo assist management in fixation of selling priceTo present comparative cost data for different periodsTo provide the basis for production planning.
6. Cost classificationCost classification is the process of grouping costs according to their common features.
7. Classification of costOn the basis of timeHistorical costPre-determined costOn the basis of behaviour of costVariable costFixed costOn the basis of functionsManufacturing costAdministration costSelling & distribution costResearch & development costPre-production costOn the basis of controllabilityOther basisControllable costNon- controllable costConversion costNormal costAvoidable costUnavoidable cost