Cost Accounting

Meaning

A field of accounting which tells us about cost of doing business

                                                        OR                                      

Cost accounting is the field of accounting which is concerned with knowing the cost of each and every business operation.

In previous days the concepts about cost accounting was very limited in those days it was defined as

“It is concerned with calculations of cost”

But now the new concept is that

“It is concerned with control of cost”

Scope and objectives

• To ascertain the cost
• To fix the selling price
• To control the cost
• To formulate business policy

Limitations of financial accounting

It tells us about the overall positions of the business and it is historical in nature means that it tells us about the cost of the product at the time it was purchased it may be the cost of last year or so.

There is no material cost control system.

There is no labor cost control system.

There is no concept of performance appraisal.

It gives us insufficient information about price fixing.

Difference between cost accounting and financial accounting

Financial accounting record, summarize and provide information to the stake holders.

Cost accounting is concerned with calculations of cost and provides that information to the managers.

Financial accounting is related with the preparation of financial statements and there is no concept of analysis of cost and profit which is given in these statements.

Cost accounting actually shows detail cost and profit data and also carries the complete analysis of these data.