Professional Documents
Culture Documents
Compulsory documents:
1. Profit and Loss Account (in accordance with Part II
of Schedule VI of Companies Act 1956) 2. Balance sheet (in accordance with Part I of Schedule VI of Companies Act 1956) 3. Directors Report 4. Audit Report
Voluntary disclosure
Profit and loss account and balance sheet drawn in
summarized manner in a columnar form Presentation of highlights of information contained in published accounts Cash flow statement Fund flow statement Important accounting ratios
Student exercise
Go through contents of Profit and Loss Account (in
accordance with Part II of Schedule VI of Companies Act 1956) 2. Balance sheet (in accordance with Part I of Schedule VI of Companies Act 1956) analyze the contents of annual reports of a company.
Meaning
Cost accounting relates to the collection, classification,
ascertainment of cost and its accounting and control relating to the various elements of cost.
of goods and services It provides statistical data on the basis of which future estimates are prepared and quotations are submitted. It is concerned with cost ascertainment and cost control It establishes budgets and standards so that actual cost can be compared to find out deviations or variances It involves the preparation of right information to the right person at the right time so that it may be helpful to management for planning, control and decision making.
Meaning of cost
The amount of resources given up in exchange for
some goods or services. In the words of American Accounting Association the foregoing, in monetary terms, incurred or potentially to be incurred in the realization of the objective of management which may be manufacturing of a product or rendering of a service.
Cost classification
By nature or elements material, Labour and Overheads By functions Production, admn, Selling and distribution etc. By degree of traceability to the product direct cost and indirect
cost By changes in activity or volume fixed cost, semi-variable and variable cost By controllability controllable and uncontrollable By normality normal and abnormal By relationship with accounting period capital and revenue By time historical and predetermined cost According to planning and control budgeted cost and standard cost By association with product product cost and period cost
For managerial decisions Marginal cost total of variable costs Out of pocket cost or explicit cost Differential cost Sunk cost Imputed or notional or implicit cost Opportunity cost Replacement cost Avoidable and unavoidable cost
Elements of Cost
Materials
Labour
Other expenses
Direct
Direct
Indirect
Direct
Indirect Overheads Production or works overheads Administration OH Selling and distribution overheads
Indirect
Cost sheet
Cost sheet is a statement designed to show the output
of a particular accounting period along with break-up of costs. It discloses total cost, cost per unit of the units produced during the given period.
Direct Expenses
Prime Cost Add: Works Overheads Works Cost Add: Administration Overheads Cost of Production Add: Selling and distribution Overheads Total Cost or cost of sales
Direct Expenses
Prime Cost Add: Works Overheads Add: Work-in-Progress (Beginning) Less: Work-in-progress (Closing) Works Cost Add: Administration Overheads Cost of Production Add : Opening stock of finished goods Less: Closing stock of finished goods Cost of goods sold
The following extract of costing information relates to commodity A for the half year ending 30th Sept 2009. Purchases of raw materials Rs 1,20,000 Works overheads 48,000 Direct wages 1,00,000 Carriage on purchases 1,440 Stock (1st April, 2009): Raw materials 20,000 Finished products 16,000 (1000 tons) Stock (30th Sept, 2009): Raw materials 22,240 Finished products 32,000 (2000 tons) Work-in-progress (1st April 2009) 4800 Work-in-progress (30th Sept 09) 16000 Sales Finished products 3,00,000
Selling and distribution overheads are Rs 1 per ton sold. 16,000 tons of commodity were produced during the period. You are to ascertain 1) cost of raw material used 2) cost of output for the period 3) Cost of sales 4) net profit for the period 5) net profit per ton of the commodity.