Cost Accounting
Cost Accounting is the
process of measuring, analyzing, and reporting financial and non-financial
information related to the costs of acquiring or using resources in an
organization.
Definition of Financial
Accounting
Financial Accounting focuses on reporting
financial information to external parties such as investors, government
agencies, banks, and supplies, based on Generally Accepted Accounting
Principles (GAAP).
Definition of
Management Accounting
Management Accounting is the process of
measuring analyzing, and reporting financial and non-financial information that
help managers make decisions to fulfil the goals of an organization.
Definition of Planning
Planning consists of selecting an
organization's goal and strategies, predicting results under various
alternative ways of achieving those goals deciding how to attain the desired
goals and communicating the goals and how to achieve them to the entire
organisation.
Definition of Budget
Budget is the quantitative expression of the proposed plan of action by management.
Definition of Budgetary
Slack
Budgetary Slack is the practice of
underestimating budgeted revenues or overestimating budgeted costs to make
budgeted targets easier to achieve.
Definition of Cost
In production, research, retail, and
accounting, a cost is the value of money that has been used up to produce
something or deliver a service.
In business, the cost may be one of
acquisition, in which case the amount of money expended to acquire it is counted
as cost.
A Cost (such as the cost of labour or
advertising) is usually measured as the monetary amount that must be paid to
acquire goods or services.
Definition of Cost
Object
A Cost Object is a term used to describe
something to which costs are assigned. Examples: product lines, geographic
territories, customers, departments or anything else for which management would
like to quantify the cost.
Definition of Direct
and Indirect Cost
Direct Cost is any cost that is related to a
particular cost object and can be traced to that cost object in an economically
feasible way.
Indirect Costs are related to a particular cost
object but cannot be traced to it in an economically feasible way.
Definition of Variable
and Fixed Cost
Variable Cost changes in total in proportion
to changes in the related level of total activity or volume of output produced.
A Fixed Cost remains unchanged in total for a
given time period despite wide changes in the related level of total activity
or volume of output produced.
Definition of Costing
Costing means the estimation of the cost of a
process or product.
Definition of manufacturing
costs
Manufacturing Costs are directly involved in
manufacturing of products. Examples: raw materials costs and charges related to
workers.
Manufacturing cost is divided into three
categories:
i) Direct materials cost.
ii) Direct manufacturing labor cost.
iii) Manufacturing overhead cost or indirect
manufacturing costs
Definition of
Non-manufacturing costs
Non-manufacturing costs are not directly
incurred in manufacturing a product. Examples: salary of sales personnel and
advertising expenses.
Non-manufacturing costs are classified into two
categories:
i) Selling and distribution costs.
ii) Administrative costs.
Definition of Defensive
Costs
A defensive cost is an environmental
expenditure to eliminate or prevent environmental damage.
Definition of Labour Costs
Labour costs would include travel time, holiday
pay, training costs, working clothes, social insurance, taxes on employment
&c.
Definition of Job
Costing
Job Costing is a costing method used to
determine the cost of specific jobs, which are performed according to the
customer’s specifications. It is a basic costing method which is applicable
where work consists of separate projects or contract jobs.
Definition of Actual
Costing
Actual Costing is the recording of product
costs based on Actual cost of materials and Actual cost of labour.
Actual Costing is a cost accounting system that
uses actual cost, direct-cost rates, and actual qualities used in production to
determine the cost of specific products.
Definition of
Activity-Based Costing (ABC)
Activity-based costing (ABC) is a costing the method that assigns overhead and indirect costs to related products and
services.
Definition of Standard
Costing
Standard costing is a costing system that
traces direct costs to output produced by multiplying the standard prices or
rates by the standard quantities of inputs allowed for actual outputs produced
and allocates overhead costs on the basis of the standard overhead cost rates
times the standard quantities of the allocation bases allowed for the actual outputs
produced.
Definition of Raw
Materials
A Raw Material is a basic material from which
a product is manufactured or made.
Definition of Inventory
Inventory means a detailed list of all of the
items on hand. Three types of inventory.
i) Direct materials inventory
ii) Work - In - Process inventory
iii) Finished - Goods inventory
Definition of
Inventoriable Costs
Inventoriable Costs are all costs of a product
that a company regards as an asset in the accounting period in which they are
incurred and which become a cost of goods sold in the accounting period in which
the product is sold.
Definition of Period
Costs
Period Costs are expenses of the accounting
period in which they are incurred because managers expect these costs to
increase revenues in only that period and not in future periods. Examples:
design costs, marketing, distribution, and customer service cost.
Definition of Value
Chain
Value Chain is the sequence of business
functions by which a product is made progressively more useful to customers.
Definition of Supply
Chain
Supply Chain describes the flow of goods,
services, and information from the initial sources of materials and services to
the delivery of products to customers.
Definition of Marketing
Marketing means promoting and selling products
or services to customers or prospective customers.
Definition of Customer
Relationship Management
Customer Relationship Management is a strategy
that integrates people and technology in all business functions to deepen
relationships with customers, partners, and distributors.
Definition of Total
quality management (TQM)
Total Quality Management (TQM) is an
integrative philosophy of management for continuously improving the quality of
products and processes.
Supti Saha
Session: 2016-17
Department of Accounting
