Cost Accounting:
Cost accounting is a branch of accounting that has evolved to overcome the limitations of financial accounting. It is the process of accounting for cost, which is concerned more with the ascertainment, allocation, distribution and accounting aspects of cost. It is that branch of accounting, which deals with the classification, recording, allocation, summation and reporting of current and prospective costs. Actually, it is the formal mechanism by means of which of products and services are ascertained and controlled.
It is an internal reporting systems that aims to assist the management for planning and decision-making it primary emphasizes on cost and deals with collection, analysis, interpretation and prospective for managerial decision making on various business problems.
Cost accounting is more concerned with short-tem planning and its reporting period is much losses that financial accounting. It deals with historic data but is also futuristic in approach. Cost accounting systems cannot be installed without proper financial accounting systems. Each organization can develop a costing systems best suited to its individual needs. In financial accounting the major emphasis is in cost classification based on types of transaction e.g., salaries, repairs, insurance, stores etc. but in cost accounting, the emphasis is laid on functions, activities, processes and on internal planning and control and information needs of the organization.
Similarly, according to national association of accountants USA'
From the above information definition, it can be concluded that cost accounting is accounting for cost aimed at providing cost data, statements and reports for the purposes to assists the managements in planning decision making and controlling.
Objective and Function of Cost Accounting:
The main objective and function of cost accounting are mentioned below:
1. To Ascertain Cost: The main objective of cost accounting is to ascertain the cost of goods and services. The expenses that are incurred while producing goods or rendering services are called costs. Some examples of costs are material, labor and other direct and indirect expenses. Under cost accounting, cost are collected, classified and analyzed with the aim of finding out the total as well as per unit cost of goods, services, processes, contract etc.
2. To Analyses Cost and Loss:
Another objective of cost accounting is to analyze the cost of each activity. The analysis of cost is necessary to classify the cost into controllable or uncontrollable, relevant or irreverent, profitable or unprofitable etc. similarly, under cost accounting the effects of material, idle time, breakdown or damage of machine on the cost is also analyzed.
3. To Control Cost:
Cost control is a technique that is used to minimize the cost of product and services without compromising on the quality. Cost accounting aims at controlling the cost by using various techniques, such as standard costing and budgetary control.
4. To Help in Fixation of Selling Price:
Another important objective of cost accounting is to help in fixation of selling prices. The costs are accumulated, classified and analyzed to ascertain cost per unit. The selling price per unit is calculated by adding a certain profit on the cost per units. Under cost accounting, different techniques such as job costing, batch costing, output costing services costing etc are used for determine the selling price.
5. To Aid the Management:
Cost accounting aims at assisting the management in planning and its importations by providing necessary costing information that also enable the evaluation of the past activities as well as future planning.