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1 Introduction

Cost accounting is a specialized branch of accounting focused on recording, classifying, analyzing, and controlling costs to aid decision-making and profitability analysis. Key terminology includes cost, costing, cost unit, cost centre, profit centre, and cost object, each defining various aspects of cost management. The main objectives of cost accounting are cost control, cost reduction, pricing assistance, profitability analysis, budgeting, inventory valuation, and informed decision-making.

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3 views1 page

1 Introduction

Cost accounting is a specialized branch of accounting focused on recording, classifying, analyzing, and controlling costs to aid decision-making and profitability analysis. Key terminology includes cost, costing, cost unit, cost centre, profit centre, and cost object, each defining various aspects of cost management. The main objectives of cost accounting are cost control, cost reduction, pricing assistance, profitability analysis, budgeting, inventory valuation, and informed decision-making.

Uploaded by

sujitkumarsahani07
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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COST AND MANAGEMENT ACCOUNTING.

UNIT.1

Q.1 Define cost accounting.

Cost accounting is a branch of accounting that deals with recording, classifying, analyzing, and
controlling costs associated with a business operation. It helps organizations determine the cost
of products, services, and processes, facilitating decision-making, pricing strategies, cost control,
and profitability analysis.

Q.2 Terminology in Cost Accounting

1. Cost: The monetary value of resources (materials, labor, and overheads) used to produce
goods or services.
2. Costing: The process of ascertaining costs related to a particular cost object, product, or
service.
3. Cost Unit: A measurable unit of a product or service for which costs are ascertained (e.g.,
per ton, per unit, per kilometer).
4. Cost Centre: A department, process, or function where costs are accumulated but not
directly linked to revenue generation (e.g., maintenance department).
5. Profit Centre: A division or segment of a business that directly contributes to profits by
generating revenue (e.g., a sales department).
6. Cost Object: Any item for which cost is measured, such as a product, service, customer,
project, or activity.

Q.3 what are the Objectives of Cost Accounting?

1. Cost Control: Identifying and eliminating inefficiencies in cost management.


2. Cost Reduction: Minimizing costs without compromising quality.
3. Determining Selling Price: Assisting in pricing decisions by providing cost-based
pricing information.
4. Profitability Analysis: Identifying profitable and non-profitable products/services.
5. Budgeting and Forecasting: Aiding in future financial planning.
6. Inventory Valuation: Determining the value of stock for financial reporting.
7. Decision Making: Assisting management in decisions related to product mix,
outsourcing, and investment.

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