Types OF Company

Service Sector
Provide Service
like Hospital,
Doctors, Lawyers

No Inventory

Merchandise
Sector
Only Buy And Sell
Goods
Inventory Only For Stock
Wholesaler

Manufacturing
Sector
Buy RM Process &
Then Prepare FG

Inventory
RM

Retailer
FG
WIP

BS & PL

BS & PL

BS & PL
Cost Records

Cost Accounting -- Accounting Means Recording now pending is Cost Menaning

All we know Finaincial Accounting Financial means money related.

All money related record of transaction is called Financial Accounts
When we record the transaction related to cost is called cost accounting.
Cost Accounting means recording of cost its require for manufacturing Entity
Business Org Two Types
Trading Financal Accounting only
Mfg Org- Both Fin And Cost Accounting
Why Cost Accounting for Mfg Require to calculate the cost of the Product.
But is not a easy task
Because we not know what is the cost of one product for producting
We pay rent of factory 50000 for a year
Material labour we identify but factory rent how to pt on one product its require
costing technique.
Fianance what think in year what we produce qty
Suppose we produce 10000 Unit For a year the we know that 50000/10000= 5 per
product but how we know that what unit we product in year its know exactly at the
end of the year but we want to sell the product when we make the how we prepare
the Cost of one product
We want Product Price when me make the product not at the time of year End.
If we know the price of rent for one product in today itself its called Costing
Technique.
Cost Accouning require Three Terms
1)Cost-Financial Accounts includes all expences but in Cost Accounts. Cost accounts
is part of Financial Accounts but financial account is not the part of financial
accounts Cost world Start from Production and end With Distribution. Cost Not
Includes :1) Expenses Start Before Production Start.
2) Not relate to Production & Distribution
3) Expenses incurred after the Distribution of the
Product

Pre Prd
Cost

Post Prd Cost

COST AC
FINANCIAL ACCOUNTS INCLUDE ALL EXPCENES
Start to end From Inception of company

IncomeTax- Company Pay ta x Is expences. But company pay tax for Prd And
Distribution No .
Not for Prd Not For Distribution . If Company results of Production & Distribution
Profit then pay tax if loss form that Activity then company not pay . Hence its not
related to production hence we not taken in the cost of Product.
Dividend- Pay TO shareholder reasons for they get profitBut not pay
dividend because of production or manufacture hence Its not related to
Cost

Loan When we take loan then buy land machine & The INtersest of that
we pay to lender from the date of taken the loan not from the production
start of activity. Int exp are start before the production start hence its not
a a cost

When We buy RM Then Our production Start & End to Distribtion include in
cost
Cost- --- Cost is the Amount Incurred for Production & Distribution of
goods It Does not include intereset, tax and dividend
Cost Accounting ----- Recording Of Cost related Information.
Cost comprises of (Component Of Cost) ---Material , Labour & Expences
include Electricity rent
Costing----Costing is the method or Technique with the help of which Cost
Can be ascertain.
Cost + Costing= Cost Accounting

Classificaiton Of Cost Direct Cost & Indirect Cost

Direct Cost Include Direct Mat Lab & Dm (Directly Traceble , Becemes
integral parts of FG, Increses Volume of Finish Goods then its called Direct
Cost)

Indirect Cost Include Indirect Mat Indirect & Exp

Cost Includes Following

Responsibility Centres

Cost Centers

Cost Centers ---

Profit Centers

Revenue
Centers

Investment
Centers