Cost Accounting

Cost Accounting:

Basis for planning and control

For management future planning their day-by-day control activities, financial, cost and economic data gathers by controller, chief executive and accounts departments.
They must have good communication with party’s concern government agencies and other interested parties.
Externally includes shareholders, future investors, tax department, government agencies and other interested parties.
Internally includes operating management (foremen and supervisor), middle management (department head, division manager & brand manager) and executive management (president, vice president, executive in-charge of manufacturing, purchasing, marketing, engineering, finance and accounting.)

Reporting function

Accounting information is a mean of providing result for management as well as for external users.
External users get information in annually, semi-annually and quarterly reports, includes profit and loss account, balance sheet, change in working capital and cash flow statement, less explanatory, impossible to include relevant data.
Internal users, have access to many source of information.

Evaluation of annual result to outsider

  1. Current ratio
  2. Acid test ratio
  3. Income before tax
  4. Net income %
  5. Gross profit %
  6. Rate of return on capital employed

Evaluation of annual result to insider

  1. Unit manufactured cost
  2. Unit cost of finished goods beginning and ending.
  3. Unit cost of goods sold
  4. Break even point

COST

Accountant, economist, engineers and others have developed cost concept to their need. So it is not easy one to explain the term cost, however following are:

AAA -Forgoing measured in monetary term to achieve specific objective.
-Exchange price, a forging, and a specific mode to get benefit.

AICPA -Decrease in net assets as a result of use of economic in creation of         revenue or imposition of tax by government.

Expense is the... [continues]

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