Ch 1Introduction to Cost Accounting — Class 12 Cost Accounting, concept-first.

Every business that makes a product or renders a service incurs expenditure — on materials, on the wages of the people who do the work, and on a range of other running expenses.

Cost accounting is not an end in itself — it exists to serve the information needs of management. Its main objectives are the following.

Nature of cost accounting. Cost accounting has the following essential characteristics: - It is a branch of accounting that deals specifically with costs, alongside — and drawing data from — financial…

A cost accounting system, well designed and honestly operated, brings real benefits — but it also has genuine limitations, and a balanced view acknowledges both.

Cost accounting and financial accounting are two branches of the same tree — both record money spent and earned — but they serve different users and answer different questions.

To ascertain and control cost, a business must decide where costs are being incurred and to what they are to be attached.

The same total expenditure of a business can be sorted, or classified, in several different ways depending on the purpose the classification is meant to serve.

When cost is classified by nature, it falls into three basic elements — material, labour and expenses — and each of these is further divided into a direct and an indirect part.

Different industries make different kinds of things — some produce identical units continuously, others carry out separate jobs to individual customer orders.

A method of costing (job, process, unit, etc.) settles the way cost is collected for a particular kind of production.

A costing system is not bought off a shelf and switched on — it must be designed to fit the particular business, then introduced with care.

A cost sheet (also called a statement of cost) is a statement that shows, in a logical order, the various elements of cost of a product for a given period, built up stage by stage from prime cost thro…

Sample papers and previous-year board questions for this subject.