Cost accounting is a step further to and a refinement of financial accounting in which cost of manufacturing and selling each product or job or rendering service is determined, not at the time of accounting period but at the time when the product is manufactured or any service is rendered. In simple words, costing is a systematic procedure for determining the unit cost of output produced or services rendered. It provides for an analysis of the expenditure which enables the management to know not only the total cost but also its constituents. Different authorities have defined the term "cost accounting" which helps in reflecting the multi-sided meaning the subject contains. The definition given by J. W. Neuner is considered more satisfactory and concise which is as following:"Cost accounting is an expanded phase of the general or financial accounting of a business concern which provides management promptly with the cost of producing or selling each article or of rendering a particular service". In short, cost accounting is the process of accounting for cost, which begins with regarding and classifying of incomes and expenditures. It ends with the preparation of periodical statements and reports for ascertaining and controlling costs. So as predicted today, cost accounting may be defined as the process of measuring, analyzing, computing, and reporting the cost, profitability and performance of operations.
Differentiate Cost, Expenses and Losses
Cost is defined as the value of the sacrifice made to acquire goods or services, measured in money by the reduction of assets or incurrence of liabilities at the time the future benefits are acquired. At the time of acquisition, the cost incurred is for present or future benefits. When these benefits are utilized, the cost becomes expense. An expense is defined as cost that has given benefits and is now expired. Unexpired costs that can give future benefits are classified as assets. Expenses are matched against revenue to determine net income or loss for a period. Revenue is defined as the price of product sold or services rendered.
Cost: Sacrifice of resources in order to acquire some resources. Cost means a sacrifice or giving up of resources for a particular purpose frequently measured by the monetary units that must be paid for goods and services.
Expense: Cost becomes expense when the benefit of recurring cost is got.
Losses: In certain cases, goods or services purchased become valueless without having provided any benefit. These costs are called losses and appear on the income statement as a deduction from revenue in the period that the decrease in the value occurred.
[From the use of Assets in the Manufacturing process]
Manufacturing Selling & Finished Goods
Selling and administrative
From the use of assets in the Selling and Administrative process
[From the failure to use the assets in manufacturing, selling or administrative process]
Figure: Relation of Cost, Expense and loss
So we are seeing that there are some significant differences among cost, expense and loss, which are-
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