Q.What is Cost Accounting? State any four objectives of Cost Accounting.

Cost Accounting exists to serve a clear set of managerial purposes, not merely to keep records for their own sake.

Cost Accounting is a formal system of recording, classifying, allocating and analysing cost data, and reporting cost information to management, for the purposes of cost ascertainment, cost control, cost reduction, and decision-making. Four of its key objectives are: (1) ascertainment of the cost of each product/job/service, (2) control of cost by comparing actuals against budgets or standards, (3) determination of a reasonable selling price based on cost data, and (4) guiding managerial decisions such as make-or-buy or accepting a special order.

Cost Accounting is a formal, systematic system of recording, classifying, allocating and analysing cost data, and of reporting cost information to management on a regular basis, for the purposes of cost ascertainment, cost control, cost reduction, and managerial decision-making. It is broader than mere costing, because it also builds the records, the classification structure and the reporting mechanism around the technique of ascertaining cost.

Four of its principal objectives are:

1. Ascertainment of cost — to find out, as accurately as possible, the total cost and the cost per unit of each product, job, process or service produced by the organisation.
2. Cost control — to keep actual costs within a planned, budgeted, or standard limit, by regularly comparing actual performance with the plan and investigating any significant variance.
3. Determination of selling price — cost data forms the base on which management fixes a reasonable selling price that covers cost and yields an adequate margin of profit.
4. Guiding managerial decisions — reliable cost information is essential for decisions such as whether to make a component in-house or buy it from outside, whether to accept a special order at a reduced price, or whether to discontinue a loss-making product line.

(Other objectives — cost reduction, measuring departmental/product profitability, providing a basis for budgeting and standard costing, and disclosing wastage or idle capacity — are equally valid answers if the question is framed to ask for objectives generally rather than exactly four.)

Students frequently list objectives that actually belong to Financial Accounting (e.g. "to prepare the profit and loss account for shareholders") — remember Cost Accounting's objectives are internal and management-facing (ascertaining, controlling, and reducing cost; guiding decisions), not statutory/external reporting objectives.