This study was conducted to find out the cost accumulation procedure of Telenor. During this research work it was found that Telenor is involved in cost accumulation procedure and they are doing it with the help of information system where they collect and maintain a database of the expenses incurred by a business in the course of its operation. During this research work it was found that they are using process costing system. I will be discussing particularly Telenor in the light of this topic so that this study can ultimately have useful meaning. It was very difficult in the beginning to start working on this topic but guidelines which were given in assignment helped me a lot so I was able to complete this assignment at its best.
1. COST ACCUMULATION METHODS
1.1 Management Accounting
Accounting is the process of accumulation, classifying, interpreting and presenting financial information. Financial accounting is that basic process with management, investor, creditors and other eternal parties as the users of the accounting information. Management accounting involves accumulating, classifying, interpreting and presenting financial data primary for management and other insiders.
1.2 Cost Accounting
A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance A budget, the key to planning and controlling involves cost accounting data. Where to set and optimal price for a product or service cannot be decided without knowing the cost of what is to be sold.
1.3 Cost Accumulation Procedure
The use of an accounting system to collect and maintain a database of the expenses incurred by a business in the course of its operation. The two main forms of cost accumulation are (1) a job order system where direct materials, staffing and overhead costs are collected under assigned job number and (2) a process costing system where costs are maintained and associated with a particular cost center.
1.3.1 Process Costing
Process costing is an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production. Eventually, costs have to be allocated to individual units of product. It assigns average costs to each unit, and is the opposite extreme of Job costing which attempts to measure individual costs of production of each unit.
Process costing is a type of operation costing which is used to ascertain the cost of a product at each process or stage of manufacture. CIMA defines process costing as "The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or processes. Costs are averaged over the units produced during the period". Process costing is suitable for industries producing homogeneous products and where production is a continuous flow. A process can be referred to as the sub-unit of an organization specifically defined for cost collection purpose.
I. The importance of process costing
Costing is an important process that many companies engage in to keep track of where their money is being spent in the production and distribution processes. Understanding these costs is the first step in being able to control them. It is very important that a company chooses the appropriate type of costing system for their product type and industry. One type of costing system that is used in certain industries is process costing that varies from other types of costing (such as job costing) in some ways. In process costing unit costs are more...