Tutorial Assignment - Cost Accounting
Name: Jeevan S M
Roll No: 22BCS049
1. Meaning of Cost, Costing and Cost Accounting
Cost: Cost is the amount of expenditure incurred (actual or notional) relating
to a specific thing or activity — such as a product, job, service, or process.
Costing: Costing is the process of determining the cost of doing something
— such as manufacturing an article or performing a service. It includes
techniques and processes for ascertaining costs used in various industries
(e.g., job costing, process costing).
Cost Accounting: Cost accounting is the application of accounting
principles and techniques to ascertain, control, and reduce costs. It involves
recording, classifying, analyzing, and reporting cost information to assist
management in planning and decision-making.
2. Advantages of Cost Accounting
• Determines profitability of activities.
• Aids in cost control by comparing actual and budgeted expenses.
• Facilitates inventory control through EOQ and stock management
techniques.
• Helps in policy formulation for production and pricing.
• Assists in decision-making whether to produce internally or buy externally.
• Helps in fixing selling prices, especially during market fluctuations.
• Identifies idle capacity to improve efficiency.
• Provides societal benefits such as fair pricing and inflation control.
3. Difference Between Cost Accounting and Financial
Accounting
Basis Cost Accounting Financial Accounting
Nature Deals with recording and Records financial
analysis of costs related to transactions for a given
production. period.
Purpos Aids management in Shows overall
Basis Cost Accounting Financial Accounting
e controlling and reducing profitability and
costs. financial position.
Users Internal management. External users such as
investors, creditors,
regulators.
System Not necessarily double- Always follows double-
entry. entry system.
Time Reports are prepared Reports are prepared
Span whenever required. periodically.
Measur Uses both monetary and Uses only monetary
ement non-monetary units (e.g., units.
Unit labour hours).
4. Elements of Cost
• Direct Material – Raw materials forming part of the finished product.
• Direct Labour – Wages paid to workers directly involved in production.
• Direct Expenses – Costs directly traceable to specific jobs or products.
• Factory Overheads – Indirect materials, labour, and expenses in
production.
• Administrative Overheads – Office and administrative costs.
• Selling and Distribution Overheads – Marketing, advertising, and delivery
costs.
5. Preparation of Cost Sheet
Given Data
Particulars Amount (₹)
Opening stock of finished 9,750
goods
Closing stock of finished goods 11,100
Raw materials consumed 35,250
Carriage on materials 850
purchased
Direct wages 18,450
Factory expenses 2,750
Selling expenses 2,450
Office expenses 1,850
Particulars Amount (₹)
Sales 75,000
Sales on scrap 250
Cost Sheet
Particulars Amount (₹)
Prime Cost:
Raw materials consumed 35,250
Add: Carriage on materials 850
purchased
Add: Direct wages 18,450
Prime Cost 54,550
Add: Factory expenses 2,750
Less: Sale of scrap (250)
Factory Cost (Works Cost) 57,050
Add: Office expenses 1,850
Cost of Production 58,900
Add: Opening stock of finished 9,750
goods
Less: Closing stock of finished (11,100)
goods
Cost of Goods Sold 57,550
Add: Selling expenses 2,450
Total Cost (Cost of Sales) 60,000
Sales 75,000
Profit 15,000