Cost Accounting NotesWord格式文档下载.docx

Cost Accounting NotesWord格式文档下载.docx

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S.V.Ltd.

NewDelhi

Subject:

EstablishmentofaCostAccountingSystem

Sir,

Duringthecourseofourdiscussionwithyoulastmonth,youmentionedthatyourcompanydidnotrequireacostaccountingsystemasithadasoundfinancialaccountingsystem.Afterourdiscussionwithyou,wehadanopportunitytostudytheproducts,processesofmanufacture,organizationandsellinganddistributionmethodsofyourcompany-whichisamanufacturingcompany.Wehavecometotheconclusionthatyourcompanycertainlyrequiresacostaccountingsystem.Tostrengthenfurtherourview-point,wegiveourreportbybringingthedistinctionsbetweenthetwosystemsasbelow:

Thefinancialaccountingsystemofacompanymainlyservesasausefulsourceofinformationtoowner/shareholders/creditorsandfortaxpurposes.Itdoesnotprovideadequatehelptotheexecutivesworkingintheorganization.Theinformationprovidedbythefinancialaccountingsystemservesnousefulpurposefromtheview-pointofplanning,controlanddecisionmaking.Theabsenceofrequiredinformationrendersplanning,controlanddecisionmakingextremelydifficult.Ontheotherhand,costaccountingsystemwasevolvedasasupplementaryaccountingmethodmainlytoservetheneedsofmanagement.Costaccountingsystemcanprovideataregularinterval,theneededinformationtotheconcernedexecutivestoperformthefunctionsofplanning,controlanddecisionmaking.

Thefinancialaccountingsystemshowsthetradingresultsofthecompanyasawhole;

itdoesnotanswerthequestionwhythereisanincreaseoradecreaseinprofitorloss.Theprincipleofmatchingcostswithrevenuesunderacostingsystemnotonlyindicatestheprofitorlossofeachproduct,butwouldalsoshowthecorrectvalueofclosinginventory.Thuscostingsystemhelpsfinancialaccountingsystemtoo.Underfinancialaccountingsystemthefinancialstatementsarepreparedonlyatthecloseoftheaccountingperiod.Suchstatementsdonotprovideday-to-daycostinformationforevaluatingtheefficiencyoftheconcern.Butcostaccountingsystemcansupplyeverypossiblecostinformationtomanagementformanagerialcontrol.Undercostaccountingsystembyusingstandardcostingthevariancesbetweenpredeterminedandactualcostscanbedetermined.Thesevariationsandtheircausesspeaksabouttheconcern’soperatingefficiencyandinefficiency.

Infinancialaccountingsystemnoattemptisgenerallymadetorecorddatabyjobs,processes,products,departmentsetc.Itonlyprovidesinformationintermsofincome,expenses,assetsandliabilitiesforthecompanyasawhole.Thustheavailableinformationisnotveryusefulfortheascertainmentofprice,controlofcosts,ascertainmentofproductprofitabilityetc.Costaccountingsystemrecordsdatainthemannerthathelpstheascertainmentofpriceandprofitabilityandalsothecontrolofcostsbyusingvariances.

Governmentinitseffortstoprotectconsumers,oftenresortstostatutorypricecontrol.Costaccountingsystemcanhelpbyprovidingenoughcostinformationwhichcouldbeutilizedtopressuponthegovernmenttoconvinceforpriceandtoarriveatasuitablepricebeforetheirarbitraryfixationofit.

Itisapparentfromtheabovediscussionthatdetailedandanalyticalinformationcannotbehadfromexistingfinancialaccountingsystem.Wethereforestronglyrecommendtheneedfortheintroductionofasoundcostaccountingsysteminyourconcern.

Yoursfaithfully,

X.Y.&

Co.

CharteredAccountants.

Question2

Definetheterms‘costcentre’and‘costunit’.

（a）CostCentre

Thetermcostcentreisdefinedasalocation,person,oranitemofequipmentoragroupoftheseforwhichcostsmaybeascertainedandusedforthepurposesofcostcontrol.Costcentrescanbepersonalcostcenters,impersonalcostcenters,operationcostcenters,andprocesscostcenters.

CostUnit

Thetermcostunitisdefinedasaunitofquantityofproduct,serviceortime（oracombinationofthese）inrelationtowhichcostsmaybeascertainedorexpressed.Itcanbeforajob,batch,orproductgroup.

（b）

Industry

Methodofcosting

Unitofcost

（i）NursingHome

Operating

PerBedperweekorperday

（ii）Roadtransport

PerTonneKilometerorpermile

（iii）Steel

Process

PerTonne

（iv）Coal

Single

Perunit

（v）Bicycles

Multiple

Eachunit

（vi）Bridgeconstruction

Contract

Eachcontract

（vii）InteriorDecoration

Job

EachJ