B com 2nd year cost accounting notes
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|CHAPTER 1||Importance and Elements of Cost|
|CHAPTER 5||Contract and Job Costing|
|CHAPTER 6||Process Costing|
|CHAPTER 7||Operating Cost|
|CHAPTER 8||Reconciliation of Cost and Financial Accounts|
|CHAPTER 9||Unit of Output costing|
|CHAPTER 10||Tender price|
|CHAPTER 11||Machine Hour Rate|
|CHAPTER 12||Cost Contral Account and Integrate Accounts|
Meaning and Definition of Cost Accounting
Meaning and Definition of the Cost Accounting
Accounts are done in cost accounting in such a way that the various expenses or services related to the production of the goods or services can be distributed in such a way that the total and per unit cost of the goods or services can be known and necessary for professional control and policy making. To get data and information.
In other words, in the cost accounts, various expenses are analyzed by scientific method so that the total cost of doing any work and production of a commodity and the value of the total services etc. are accurately ascertained. In fact, the information provided by cost accounting makes it possible to analyze, control and analyze the cost.
“Cost account refers to the classification, accounting and distribution of expenses properly, so that the cost of production of goods or services produced can be known. Proper and systematic data are presented in such a way that the administrators are guided and facilitated in their management work. It determines the cost of each contract, procedure service or unit and states the costs of production, sales and distribution. “
Harald J. Halden – “Cost accounting is an assortment of expenditures by which the total cost of a particular unit of production can be accurately ascertained as well as how the total cost is derived.”
– Dalter W. – “Cost accounts are a method of accounting under which material and labor used in making a specific groom or in doing a specific work is kept.”
“Cost accounting distributes expenses in such a manner that the knowledge of Jio becomes knowledgeable and presents it in such a proper way that its producers can control their business.”
“Cost accounting is a science or method that intelligently presents all those key elements per unit of a particular production function. Which has created a cost Such as material, labor, other direct and indirect expenses. “
Objects of Cost Accounting
Some of the major objectives of cost accounting are as follows
(1) To find the total and cost per unit of production.
(2) To analyze and classify the units produced.
(3) Determination of object and tender values.
(4) To control the cost of production, to find out the inadvertent and wastage in construction work and to prevent them.
(5) To make beneficial plans for the future related to production.
(6) To make an estimate for the future by knowing the capability of the present machine and technology.
(7) To determine the best methods for removing the defects of production and management. Knowledge of sources of profit and loss by matching 18 different cost accounts. (9) To provide assistance in making final account.
(10) To bring economies in the production work keeping in mind the size of the production and the design of the factory, etc. …
Cost accounting done
Functions of Cost Accounting
(1) Cost Determination –
The cost of production of various items manufactured by cost accounts is determined. They are classified on various tasks, processes and contracts.
(2) Presentation of data for future plans
The cost account presents the appropriate numbers so that producers can determine the prices of various goods and determine the quantity of production to be made in the future.
(3) Cost Control –
The major function of cost accounting is to control costs so that more and more production is done at the least cost. Its
(4) Cost Analysis –
A detailed analysis of various expenses is made in the cost analysis. The differences are obtained by comparing these expenses with the expenses of the previous period and comparing them with the standard cost.
(5) Determination of selling price
The main function of cost accounting is also to determine the fair selling price so that competition can be faced and fair profit can be made.
(6) Measurement of Effeciency of Different Departments –
Under the cost accounting, proper distribution of their work is done among the laborers and the proper method of payment of wages, budgetary control, etc. The performance of various departments is studied.
Benefits and importance of cost accounting
(Merits and Importance of Accounting)
The importance of cost accounts is increasing day by day because through it any organization studies its cost related problems and maximizes profit. Different categories have different benefits from cost accounts. The importance of cost accounts can be analyzed under the following headings
(I) Advantages to producers and Managers –
Producers and managers receive the following benefits from cost accounts in any organization.
(1) Best use of materials and plant.
(2) Assistant in financial accounts.
(3) Knowledge of useful and useful functions for business. (4) Preparation of financial statements at any time.
(5) Analytical and comparative study of production cost.
(6) Assist in the determination of standard.
(7) Determining the fair selling price.
(8) To check the differences between standard cost and budgetary controls.
(9) To estimate and tender for work.
(10) To find the cause of profit and loss.
(11) Utility in recession.
(12) Preventing wastage.
(13) To formulate policies for the future.
(14) To overcome the problems of workers.
(II) benefits to employees (Advantages to Workers) –
Through the cost accounts, the work done by each worker is determined, as a result of which each employee works according to his / her deadline and there is a cost accounting / 4 reduction in wastage in the institution. Full details of the work of each employee are maintained and remuneration is paid accordingly. In this way, cost-related accounts increase the efficiency, income and productivity of workers.
(iii) Advantages to Investors –
Through cost accounts, the institution knows which institution to invest in so that maximum. To get benefits. Knowledge of current and future profit sharing potential of the business. Cost
Due to the knowledge of the real state of business through articles, the trustees and lenders have full faith in them.
(IV) Advangates to consumers –
Production cost is reduced through cost accounts and variety also improves as the work efficiency of workers increases and wastage also decreases due to keeping an account of production. Thus, due to lower production costs, consumers get good quality goods at low prices. In this way producers provide consumers with satisfaction related to price and variety of goods.
(V) Advantages to Government
Detailed and analytical information of various industries is obtained through cost accounts, which helps the government to formulate important policies regarding the industries. Cost accounts play an important role in determining policies such as pricing, price control, income tax assessment, dividend payment, government protection, etc.
It is clear from the above discussion that keeping the cost accounts does not only benefit the producers, employers and lenders, but it benefits in every sphere of the society. These accounts benefit the government, consumers and the nation as a whole. The cost accounting system is adopted to increase the efficiency of government industries and enterprises. The cost line method is adopted to work even in an emergency situation.
Cost to businesses
The objectives and principles of cost accounts in businesses are the same. But the methods of cost accounts vary according to the nature of the business. The main methods of cost accounting are as follows
- Method or process cost method
- Majority or mixed cost method
- Same cost method
- Cost plus method
- Subsidiary or contract cost method
(1) Process Costing Method
When an object goes through several methods or processes or different stages of production to reach the manufactured state, the function of each method can be easily separated from the other method, and the producer each The method cost method is adopted if one wants to know the individual total cost of the situation or method and the cost per unit. In this method, a separate account of each process is opened and the expenses related to it are written in it. Wastage or Scrap of each method and loss in weight is known by this. This makes the cost of production of each method known. The material of one method is transferred in the second method and the second in the third method like the raw material. This method is used in industries that make oil, chemicals, sugar, soap, dyes and varnishes, vegetable ghee, etc.
(2) Multiple Costing Method
This method is used in industries where different types of small items are produced and later the final product is made by mixing all of them; Such as bicycle, typewriter, television, motorcar, radio, clock, sewing machine etc. Because all the parts and objects used in this type of objects are different from each other. Therefore, it is necessary to know the cost of each component and more than one cost estimation method is used to determine their separate cost. That is why it is called the majority cost accounting method. It is clear that due to the different costing method being used for different items, it is called the majority cost accounting method.
(3) Uniform costing –
When the same cost method is adopted by the entities doing the same type of business, it is called the ‘uniform cost method’. Many chambers of commerce recommend their members to adopt a cost method. So that comparative studies can be done. In the same-cost system, an attempt is also made to adopt the same method of wage and bonus schemes, departmentalization of expenses and sharing of indirect expenses.
(4) cost addition method
When certain tasks are to be completed early in the emergency, the contractors are given the contract without fixing the contract price on the condition that the contract cost will be added to the fixed price on the contract cost. The contracts awarded on this basis are called cost plus contracts.
(5) Job or Contract Costing –
In businesses where production or any work is done as per order, the job costing method (Job Coshi) is adopted for cost review and profit-loss information of each sub-work. Separately to collect the cost of each job (Job Care is made. This method is adopted by printers, machine parts manufacturers, foundries and general engineering workshops.
The contract cost method is adopted when the nature of work is large and it is going to run for a long period. Separate accounts are maintained for each contract. This method is mainly used in buildings, roads and dams and other construction etc.
(6) Target Costing Method
In this method, before the start of production or production, the goals of construction expenses are set. Targets of production expenditure are set on the basis of estimates and during the construction period these goals are kept in full consideration. Special care is taken in setting goals. This method is used in the construction of large dam bridges or roads. Estimated cost is called target cost and on this basis tenders are sought from contractors and accepted.
(7) Operating Cost System –
Institutions that do not produce but provide services use this method. This method is also known as ‘Service Cost Method’. Railways, bus, transport, trambe companies and undertakings supplying water, electricity, gas, etc., if they want to find the cost per unit of service performed. Uses this method, such as the cost per kilometer of passenger transport or the cost per quittal-kilometer of freight.
(8) Batch Costing –
This method is adopted where the production work is completed in separate groups for convenience and different cost of each group has to be determined. Under this method, each group is considered a unit of production. The cost per unit is determined by dividing the total commodity units produced in batches by the group cost. This method is mainly used in the manufacture of food items, bakeries and factories. In fact, this method is only an extension of the work cost system
(9) Single or Output or Unit or Uniform Cesting Method –
This method is used in those institutions where all the units of manufactured goods are the same and the manufactured goods are produced. This method is used in coal mines, Collieries, Brick klins, Cement factories, Paper mills, Breweriews, Dairies and Quarries etc. is . In this method, the cost per unit and the total cost of production are calculated.
(10) Departmental Costing System –
This method is used when the work of the FACTRA is divided into the toll-free departments and each department has to find out the different costs. In this method, expenses are divided into all departments and profit and loss of each department is determined.
(11) Standard Costing System –
This method is used to do production efficiently and economically. Estimating the old experience and possible ecologies, the cost of various tasks is determined.
(12) Marginal Cost System –
Some factory expenses are fixed and some expenses are variable. Production has no effect on fixed costs but variable expenses change in the same proportion. If the producer wants to know that at least kilma is produced so that his steady expenditure is lost and he does not profit, then there is no loss, then by knowing the ‘break even point’ on the basis of the marginal cost method. Can.
(Meaning of Cost)
The cost is intended by fellow companions, with whose help a thing is manufactured. In cost accounts, detailed analysis and classification of all production costs is done. The classification of the odd waters of cost is to find the different cost for the underlying odd floors. Different elements of cost can be divided into two parts – (1) direct costs (2) indirect costs.
There are others in the subject which are definitely related to the particular unit of product produced. Under these, suffixes are included in material manifesto and other direct expenditures. There are indirect expenses which do not relate to the quantity of production. These are the expenses of permanent species. These include office overhead rent and distribution overhead etc. The classification of costs can be divided on the following grounds: There are different elements of cost.
Other Direct Expenses
(i) Direct Costs
(Ii) Indirect Costs
Meaning & Definition of Contract Account
The method of keeping accounts (by contractors) of the work done on contract is called ‘Contract Cost Method’ ie the accounts kept by the contractors in relation to finding the cost and profit and loss of the contract. The accounting procedure is known as ‘contract cost method’. .. “The contract or term-outlay method is adopted by those businesses; Who perform fixed contracts, such as building-builders and contractors. “
Walter W. Big 0 – “This method of costing is adopted in businesses where creative contracts are taken and there is a desire to know the true cost of each contract not only at the completion of the contract but at different stages of work completion.” .
– The time of complete execution of the JR Bottleboy contract is fixed. Hence, contract costing method can also be called as ‘Terminal Costing’. If the contractor is unable to complete the contract work within the stipulated time, then he is statutorily liable as per the written contract to the contractor.
The contractor records all direct and indirect expenses incurred in connection with the contract in the debit of the contract account while the material returned to the stores from the contract site, material transferred to other contracts, the material remaining at the contract site and the value of the plant and certified work and Represents the cost of the uncertified work in the credit to the contract account. Finally, the contract uses both sides of the account to find the profit or loss on the contract. If the sum of the credit side of the contract account is greater then the difference is considered as profit while the difference is the apparent difference when the sum of the debit side is greater.
Contract Account Preparation
(Preparation of Contract Accounts)
The contract account is found in two parties – the name side and the deposit side. The difference between these two parties represents the profit or loss on the contract. The details of the main items falling on these two sides are as follows.
Name of Contract Account
(Defict side of Contract Account)
On every contract, some laborers, masons, etc. are employed to complete the contract work. The contract account related to the amount of remuneration paid to them is debited. If the laborer works on the same contract all the time, then the wage is determined from the time card itself, but for the workers who work on more than one contract, using the time card and the subtitle-card, the wages- By making a brief The wages of work done on different contracts are determined. The wages which have become due on the date of creation of the contract account, but which have not been paid, are shown in the debit of the contract account as Unpaid or Outstanding or Accrued wages. Another option could be to write down the amount of unpaid or earned wages with the wages paid.
Other Direct Expenses –
Other expenses directly incurred on the contract are also written on the debit side of the contract account. If some direct expenses are unpaid (outstanding) then at the end of the year they are debited to the contract account along with the expenses paid.
Indirect Expenses –
Some expenses are of such nature that are made jointly on many contracts and it is not possible to divide them on different contracts, for example, salary of manager, engineer, supervisor etc., expenses related to arrangement of stores, Administration and office related expenses etc. Such expenses can be divided for different contracts on any of the following reasonable grounds-
(a) On the basis of direct labor,
(b) On the basis of direct material,
(c) Based on the original cost,
(d) Labor Hour Rate
Plant and Machinery
Plants and machines are used in almost every contract. Therefore, the amount of depreciation on these should be written on the debit of the contract account. The following points should be kept in mind while accounting for depreciation.
(I) If the machine is of high value, its entire amount is written on the debit side of the contract account and when the contract account is closed, the revalued amount of the machine is written on the credit side.
(II) If the machine has gone on hire, its fare will be written in the name side only.
(III) When the machine is used on many contracts for a short period of time, only the loss of the contract account is debited.
(IV) Even when the machine is of lesser value, only the amount of depreciation is debited to the contract account. Calculation of Depriciation While removing depreciation on plant and machine, it should be noted that it is written per year along with the percentage of depreciation. If the percentage of degradation per annum is then the amount of depreciation is calculated taking into account the time of use of the plant and the machine and if it is not written every year with the percentage of depreciation, then the time of use of the plant and machine is not taken into account. go.
Sub-Contract Cost –
Sometimes the contractor gives a contract to complete a part of his contract to another contractor. For example, a contractor took a contract to build a picture hall, and after taking the contract, he gave the contract for digging the foundation to ‘X’, the woodwork contract to ‘Y’ and the electrical work contract to Z ‘. The payment made by the main contractor to these three contractors will be a part of the total contract cost. Thus when the contractor completes some part of his contract work to others, it is called sub-contract and the amount paid for sub-contract is called sub-contract cost which is written in the debit of the contract account.
Costs of extra work done –
Sometimes, in addition to the original contract, the contractor gets some additional work done by the contractor, for which he also pays the fixed amount separately from the contractor.
Deposit account side
(Credit side of Contract Account)
(1) Work Uncertified –
The part of the work done by the contractor which has not been certified, is called “unproven work”. Unproven work = Work done-certified work. The cost of the uncertified work is also shown on the deposit side of the contract account.
(2) Plant and Machinery in Hand
– If a plant and machinery is written to the contract account with its full value at the time of bringing the contract, then after reducing the justified depreciation at the time of removing the plant and machine from the contract, it is shown in the deposit side of the contract account.
(3) Transfer of Materials or Plant to Other Contracts –
When unnecessary material or plant is transferred to another contract, the value of the material or plant transferred in this way is transferred to the credit of the contract account ‘By Material or Plant transferred to Contract No….’ It is written.
(4) Materials or Plant Sold sold –
If some of the material or plant is sold out of the material or plant available at the workplace, then the amount by which it is sold. It is written in the credit of the contract account by ‘By Sale of Material or Plant’. If there is some profit from the sale, he will write ‘To P & LA / c’ in the debit of the contract account and if there is a loss, he will write ‘By P & LA / c’ in the credit of the contract account.
(5) Materials or Plant Returned –
If any material or plant is returned from the contract site on completion of the contract or in the middle of the financial year, the value of the material or plant thus returned is written to the credit of the contract account. In this regard, it is necessary to pay attention to the following points.
(i) If the material is returned to the supplier, then ‘By Material returned to Supplier’ will be written in the credit of the contract account, ie the supplier’s account is debited and the contract account is credited.
(ii) If the material is returned to the stores, then in the codet of the contract account, we will write ‘By Material returned to Stores’ ie Debit Store Control Debit and Contract Account is credited. ..
(iii) If some part of the plant issued during the financial year is returned to the stores, the contract will be written to the credit of the account by By Plant returned to Store.
(6) Material Lost, Destroyed or Theft
A contract account is deposited on the value of goods lost or destroyed on the contract because lost, destroyed or stolen goods cannot become a part of the cost of the contract.
(7) Work Certified
That part of the work completed by the contractor, which is passed by the engineer and craftsman of the contractor, is called certified work. The value of this certified work is written on the deposit side of the contract account.
If the contract work has not been completed by the date of preparation of the contract account, it is called an incomplete contract.
Process (method) cost
Meaning and Definition of Process Cost
(Meaning and Definition of Process accounts)
It is not possible to complete the production of any thing by a process. They have to go through many processes to reach their final position. The material made by one process acts like raw material for the second process and the finished material of the second process is the raw material for the third process. In this way, the production work of an object is completed by going through many processes. This system is used in industries like textile, soap, sugar, paper, alcohol, vegetable ghee, rubber and tires, chemicals, oil, iron and steel. In the process costing method, a separate account of each process is opened. In each account, the expenses related to it are written. Thus the cost of each process is determined separately.
According to Sharles, “Law cost accounts are used in industries whose goods are manufactured in different processes and the cost of each process needs to be determined.”
Process cost accounting refers to a method under which the production cost of a product (commodity) is determined at each stage of manufacture or at each process.
Following are the main definitions of the process cost method
According to the BK weight, process profiling is a method of finding the cost of one or more processes that is associated with the conversion of raw materials into manufactured products.
According to Heldon, “Process outlining is the method of determining costs that is used to determine the cost of a product at each process, each operation, or at every level of production.”
Procedure (Method) Takes Process Cost Accounting Objectives of the Method
(Objectives of process costing)
The main reasons for or the need for process cost accounting are as follows.
(1) To find the cost of different processes – It is necessary to find the cost of each process at different stage of production or different cost of each process. This allows a lot of convenience in establishing control over costs. With the help of process cost accounting, the cost of various processes becomes known.
(2) Knowledge of departmental efficiency and economy – To make the production process economical of each department, different cost of each process is required, which can be obtained only with the help of process cost accounting.
(3) Knowledge of decay occurring in different processes When the raw material passes through different processes, it is natural for the material to work due to other reasons like chemical reactions and evaporation. But in every process there is different amount of waste of material. Therefore, to find the true cost of each process, it is also necessary to estimate the amount of this loss which can be obtained only with the help of process cost accounting.
To find the value of a by-product.
In some industries, while producing ‘main product’, by-products and by-products are also produced. For example, in oil manufacturing, in cotton, cotton – cottonseed etc. In such industries process articles are required to find the true cost of both types of products.
General principles of process cost accounting
(General Principles of Process Costing Method)
(1) The entire factory is divided into different process centers or departments, then separate accounts are opened for each process i.e. as many process accounts are completed, as many process accounts are opened.
(2) Whatever expenditure is incurred in each process in the form of material, labor, direct expenditure, indirect expenditure, etc., all of them are written in the debit side of that process account. Indirect expenses are written into the debit of the process account by distributing it on a reasonable basis. With no basis given for the distribution of indirect expenses, they are distributed on the basis of direct labor (wages).
(3) A proper accounting of the losses in the process is maintained. If the loss or reduction in weight is normal, process account is credited from it. If some amount is received from the sale of caries or its residual scrap, it is also credited to the respective process account. Conversely, if there is more decay than normal, the excess decay is called Abnormal wastage, which is credited to the process account at the cost of production.
(4) If a process produces a by-product (By product), then the process account is credited at its cost.
(5) The amount of material put into any process is written to the debit of that process account while the amount of production it produces, and the amount of decay that is produced are written to the credit of the process account.
(6) On completion of production of each process, the average cost per unit becomes known by dividing the number of units produced in the total cost of that process.
6. General loss in production and incomplete units at the beginning and end of the period are also taken into account while calculating the average cost.
(7) Sometimes a part of the production of each process is sent to the warehouse for sale and further process is completed on the remaining part. The quantity and cost of these two parts are credited to the respective process account.
(8) Sometimes the production of one process is sent by adding some profit to the next process. This amount of profit is debited to the process account and the process account is credited with the increased value by adding it to the value of the product produced. The next process is debited with this increased value. If the profit-adding system is adopted in this way, at the end of the year, the profit-loss account for the remaining stocks must be organized for the unrealized profits.
(9) When a production process is completed, the goods manufactured in it and the same total cost are transferred to the next process and this sequence continues till the last process. But sometimes it happens that the entire goods manufactured in the KC process are not transferred to the Angali process and some part of it is transferred to the next process and some part is transferred to the warehouse for sale or sold directly. But both are in the credit of that process account.
Meaning of operating costs
(Meaning of operating cost)
Many organizations do not produce goods, but rather provide some services. For example, railways, motor companies, tramways, waterways, gas and electricity companies, hospitals, hotels, post and telegraph departments do not produce goods but provide services. Most of the expenses in these institutions are of a permanent nature. The motor traffic company wants to know what it will cost to carry one tonne of goods a kilometer. A motor-bus service or railway company wants to know what the cost will be per passenger per kilometer. Similarly, an electricity company wants to know what the cost of electricity per kWh or per unit will be. Unless we have the right knowledge of costs, The fair value of the service provided cannot be determined. Service delivery organizations use the operating cost method to find the operating cost or operating cost. Cost per unit can be determined by dividing the total expenditure or the number of units in the total cost.
The purpose of finding the transportation cost…
(Objects of Transport Costing)
Transport organizations carry and carry goods of different loads, sizes and types from one place to another. These institutions want to know what is the cost of transporting one quintal goods one kilometer? So that the rates of the fare can be determined. Apart from this, the following objectives of determining the transportation cost can be
(iv) Control over repair and maintenance expenses. csscanne Cost Unit – In transportation costs, a quittal freight is used as a unit carrying one kilometer, called a quittal / kilometer (QL / km), as passengers are transported from one place to another, So a traveler has a
Carrying the loameter is used as a unit, called “passenger kilometer
(Passenger / km.).
Before the use of the metric system, these units were called “ton / mile” and passenger mile.
Calculation of Cost
The total permanent, operating and maintenance expenses of the year are divided by the “total quilt / km” of the total cargo carried in the year or the “total passengers / km” of all the passengers carried. The calculation formula will be as follows:
The expenses which are incurred on keeping the vehicle safe and driving the vehicle are kept in this category. Such as repair and maintenance expenses, lubricants, tire tubes, petrol, diesel, depreciation, assistant and driver’s salary etc.
Use as a unit, which is called Qtl / km (QL / km). If the passengers are moved from one place to another, then a passenger is given a
Carrying the loameter is used as a unit, called “passenger kilometer
(Passenger / km.).
Before the use of the metric system, these units were called “ton / mile” and passenger mile.
Calculation of Cost
The total permanent, operating and maintenance expenses of the year are divided by the “total quilt / km” of the total cargo carried in the year or the “total passengers / km” of all the passengers carried. The calculation formula will be as follows:
Cost per passenger km. = km of the period
Electricity is produced from coal or water. The first type of electricity is called thermal power and the second type of electricity is called hydropower. Electricity is built in the power house. Now atomic power is also being built, for this, the nuclear power house should be built.
Vapor is produced and the cost per kW is determined.
Variable Expenses –
The following are the main expenses in the variable expenses related to the construction of thermal power
The sum of the cost of coal, internal car hire, collection expenses in which the initial stock and the last stock have been adjusted, the fuel used is costed, adding the cost of ash removal to it and subtracting the actual sale cost of fuel by subtracting the amount of ash sold. Huh.
(ii) Direct Labor –
• Wages of workers engaged in power generation work.
(iii) Water Supply Expenses –
Continuous supply of water is necessary for the production of vapor. The expenditure on this is included in it.
(iv) Expenditure on other substances.
Expenses for the purchase of oil, grease, parts and other goods are included in this.
(v) Repairs and Maintenance –
Expenses for repairing equipment etc. are included in this.
Fixed Expenses –
Supervision charges, office expenses, building depreciation and interest on capital are examples of fixed expenses.
Cost per unit –
The total cost per unit of electricity generation is calculated by dividing the kilowatt hours of the total electricity produced by the sum of all the variable expenditure and permanent expenses. Cocinar Kuh_ Total Variable Cost + Fixed Cost
Meaning and definition of cost solution description
(Meaning and Definitions of Cost Reconciliation Statement)
Under this method there is no need to reconcile the financial accounts of the cost accounts. But in the institutions where separate books are kept for accounting of cost and financial items, it is only natural to feel the need to match them.
Both cost accounts and financial accounts are prepared on the basis of the same original papers. Cost accounts are estimates if trading accounts are realities. A successful trader is one whose estimates are closest to the realities. By examining the hypotheses and realities, it becomes known that what was the main difference in the estimates? By examining these estimates and looking at these shortcomings and limitations, it can be found where exactly the error was in the estimates and in the future an attempt is made to bring these estimates closer to the reality? .
Following are some of the key definitions in relation to the cost resolution statement –
In the words of HJ Wheldon, cost accounting remains an incomplete system until it is structured with financial accounts in such a way that the results represented by cost accounts and financial accounts can be matched. “
According to Walter W. Bigg, “Although cost accounts and financial accounts are kept completely separate in many cases, they are not necessarily able to match each other. If it is not possible to do so, there will be little confidence in the calculation of cost accounts. “
On the basis of the analytical interpretation of the above mentioned definitions of the cost resolution statement, it can be concluded that the cost reconciliation statement provides detailed information about the reasons for the difference in net profit or net loss of cost accounts and financial accounts.
In words – “As long as there is la.” If financial accounting can be done.
Objectives for preparation of assembly statement
(Objects of Preparing Reconciliation Statement)
- The following objectives are mainly to prepare financial accounts and cost accounts.
2. To get the knowledge of the reasons for the difference – By preparing the solution statement, the reasons for the difference in the result of both the accounts are revealed. Costing articles can be made more accurate in the long run by finding out the reasons.
Reasons of Difference Between the Results of Cost Accounts
(1) Difference in direct expenses –
The overheads in cost accounts are absorbed at approximate values based on past experience while in financial accounts the actual amounts of overheads are written.
(2) Difference in direct expenses –
Due to direct expenses, there is no difference in the results displayed by both books because direct expenses are accounted for only on the actual amount in both books.
(3) Some items not to be included in financial accounts (Items excluded from financial accounts) –
There are some expenses which are accounted for in the cost accounts but they are not written in the financial accounts, due to which the results of both will be different.
(4) Some items not included in cost accounts (Items excluded from cost account) –
There are some incomes which are included in the business accounts but are not shown in the cost accounts such as commission received, capital gains, contingent benefits, interest received from the bank, etc. The omission of these incomes in the cost accounts makes a difference in the results of both accounts.
(5) Difference in methods of charging depreciations
There are different methods of writing down and generally the amount of depreciation charged by each method also varies.
(6) Difference in stock valuation.
In financial accounts, the stock is evaluated at both the cost price and market value whichever is lower, while in the cost accounts, the final stock is always evaluated at a cost. ) The cost accounts should be taken as the basis for preparing the cost resolution statement. After this, the following tasks should be done
(11) If any expenditure in cost accounts is written more than the financial accounts, then the excess should be added to the benefit of cost accounts. On the contrary, the difference in the position should be reduced from the profit of collagated articles.
(12) If the cost accounts are written more than the item of sale than the financial accounts, then the excess should be reduced from the profit of the cost accounts. In contrast, the difference amount should be added to the profit of cost accounts.
(13) If the value of initial stock in cost accounts is more than that of financial accounts, then the difference amount should be added to the benefit of cost accounts. In contrast, the difference amount should be reduced from the profit of cost accounts.
(14) If the value of the last wing in cost accounts is more than that of financial accounts, then the difference amount should be reduced from the profit of cost accounts. In contrast, the amount of difference should be added to the profit of cost accounts.
(15) If the item of expenditure is not shown in the cost accounts but has been included in the financial accounts, it should be deducted from the cost accounts. On the contrary, it should add to the benefit of cost accounts.
(16) If an item of income is not shown in cost accounts but has been included in financial accounts, it should be added to the benefit of cost accounts. Conversely, the position C should be subtracted from the profit of the accounts.
Meaning and definition of tender price
(Meaning & Definition of Tender Price)
… Often a contractor would consider his estimated cost before starting the contract work. Producers often have to tell them the approximate price in order to receive orders from customers, which is added by adding some profit to the estimated cost. This is called tendering or tender value. Tender prices are demanded from the producers before actual purchase for works in big business institutions, and the manufacturer through whom the variety of goods made is the best and the tender price is the minimum is ordered for the supply of the goods.
According to the Institute of Cost and Works Accounts England – “The cost estimate sheet is a document that gives the estimated cost of the entire production or unit.” The tender price should be determined very carefully because the tender price is comparatively
The producer will not get the order if it is more and he will have to suffer loss if it is less than the cost. Since the tender price has to be decided before production, prior experience and past costs are mainly used as the basis for this. Last year
During the period, tenders are prepared keeping in mind the possible changes in the cost incurred on the manufacture of similar items.
Things to keep in mind while preparing the tender (Elements should be kept in mind in the preparation of tender)
(1) Change in price
Generally, the prices of labor, materials and other means of production change daily in the market. Therefore, it is very important for the contractor to be aware of these changes while fixing the tender price at present so that a fair price can be determined.
(2) Cost per unit
The contractor should know the tender price / 74 time by knowing the cost per unit adequately because even a difference of money has a great effect on the order .
(3) Production Quantity
Some costs have no effect on the mere decrease or excess of production. These costs are of a permanent nature, while some costs decrease when the volume of production decreases and increases when it increases. These costs are variable costs. When the volume of production is high, the cost of fixed costs decreases per unit.
(4) Cost of Alteration –
If the variety of goods ordered. Changes in appearance, packing price, fashion, weight etc. have been demanded, so the cost of the change should also be taken into consideration. ..
A fixed percentage profit is included in the tender cost. The profit can be a fixed percentage of the cost. The profit can be levied on two bases.
(i) Percentage of profit on cost, and
(ii) Percentage of profit on sale
Profit calculation method
(i) Benefit if percentage of profit is given on cost- Total cost X percent 100%
(ii) Given the percentage of profit on sales – total cost X percent 100%
Tender value calculation
(Calculation of Tender Price)
Sometimes the cost of the last period of production or sales of some items is complete
The details are given and based on these details, the tenders value of similar items is calculated. If the cost of production during the previous period comes in different amount of expenditure, then the tender value should be calculated on the basis of cost per unit. Many forms are seen in tenders and estimates questions. Following are the main formats
(I) When there is a change in the cost of material or labor or both (When there is a change in the price of materials) – The materials, labor and other expenditure used in the tenders of goods should be taken in proportion to the cost of the previous period. . Then you should add that percentage to the increase in expenditure, reduce the percentage which is likely to decrease, and keep the same proportion of the expenditure which has not been given about it, which was in the previous period. The percentage of profit will remain the same, whatever is convenient in the previous period or on the cost or sale price, the percentage of profit should be taken out.
When tender is prepared on the basis of previous period (When tender is prepared on the basis of last period profit)
This type of tender form is used only when the cost of the last period for the determination of tender or tender price, as well as the number produced in the previous period, is also given and the desired number of items for the tender is also given. Generally, in such a situation, the variety, size, shape and quality of the goods produced and tendered during the previous period are the same. In this manner, the cost per unit of various parts of the cost is determined by preparing a cost sheet based on the cost information of the previous period. The total cost is then multiplied by the number of items related to the tender, per unit of each part of the cost.
(III) Fixed, variable and semi variable costs. Fixed expenses have no effect on decreasing or increasing production volumes such as factory rent, manager’s salary, etc. Variable expenses are proportionally reduced or increased according to the amount of production. If there is a clear instruction to reduce or exceed the proportion of these expenses, then adjustment should be made accordingly. These types of expenditures keep variability, but have less variability than proportions, rather than their direct proportional relationship with production. There are clear instructions regarding these. When the cost related information in the question is given on an appropriate basis, then the tender value is calculated keeping in mind the instructions given in the question.
(IV) When the expenses and production details of the last few weeks, months or years are given and an estimate is to be made on the basis of them.
Sometimes the cost of last period and the quantity of production are distributed. And based on them, a certain amount of estimates have to be prepared in the current period. The percentage of profit is also given in the question.
If the cost of material and labor in the previous period was Rs.2,00,000 and the construction expenditure was Rs.40,000, then the construction expenditure would be 20% of the mixed cost of material and labor. If in the current period the mixed cost of material and labor is Rs. 30,000. If the construction expenditure is 20% of this cost i.e. Rs 6,000. Therefore, the proportion in which the mixed cost of material and labor changes, in the same proportion, there will also be a change in the factory expenditure.
(ii) Sales expenses per unit will remain the same. Expenditure per unit sales remains fixed, if the last. .. Total sales expenditure during the period was Rs. 24,000 and units produced were 12,000, then sales per unit
Spend 2 happen. If the estimated production in the current period is 16,000 units then the total sales
(ii) Sustainability in other expenses – Most of the other expenses related to office and administration are of stable nature. That is, even if there is a change in production
(I) When there is value and benefit of material and labor used in the tender, indirect expenses are not paid (when the amount of materials, required for tender is given percentage of promit is given. O me not given) The solution will also be the initial and final condition of the finished product in the description of the previous type of nature.
Therefore, the benefit of the previous period will not be known. Cost and Benefits The cost office will show the cost and the cost tomorrow. The factory outlay for indirect expenditure of the tenders will be the percentage of labor and administration outlay, nor is the statement of profit, why the expenditure is made on the same basis as factory cost ?
Cost – Letter of meaning and definition
(Meaning and Definition of Cost Sheet)
The cost sheet or outlay sheet analyzes the expenses of production in an analytical manner, so that the total production cost of the units produced and each unit is known. Some definitions of the cost sheet are as follows
In the words of Harold J. Wheldon, “cost sheets are designed for managers. Therefore, it should include all the necessary details that will help the manager in checking the efficiency of production. “
According to JR Batilboi, “The cost sheet is a statement shown in the table, which covers the production cost of the card thus presented from the total production cost of a fixed time.
The type appears. It is not part of the double accounting system of cost accounts. Ordinarily more food is also made, so that the cost of the current period can be calculated from the same period of the fry period and last year. ”
In the words of Walter W. Bigg, the details of expenditure incurred on production within a certain time can be obtained from the financial books and the records of the treasury. These are represented in a memorial statement form. If this prospectus shows only the cost of the units generated over a certain period of time, then it is called a cost sheet. ”
According to ‘ICMA England’, “a cost sheet is a document that presents an estimated detailed cost collection in relation to a cost center or unit.” The car can be said to have been prepared as a cost sheet table
Which reveals in detail the cost of total production over a given period of time. It is not part of the wa system. More food is usually cooked in it so that
Or compare the current cost to the cost of past times. “
Characteristics of Cost Sheet –
(1) It shows the total cost and cost per unit.
2 It also clarifies the various organs of cost.
(3) It is topical ie it can be weekly, semi-monthly, monthly, quarterly etc.
(4) It shows the relation of various costs to the total cost.
Cost – benefit of paper and Objectives
(Advantages and Objects of Cost Sheet) –
A cost sheet benefits the production institutions in many ways, so it is prepared. Some of its benefits are as follows
(1) Cost control The main purpose of the cost sheet is to determine the speed of the product produced. With the help of a cost sheet, it is possible to determine the correct cost of the product produced.
(2) The cost-control cost sheet compares current expenditures to past expenditures, in which the reasons for their change can be ascertained. If the reason for increase in expenses is inefficiency of employees, then they can be removed and control over expenses.
(3) Comparative Study of Cost Scores With the help of the cost sheet, it can be easily ascertained by comparing the cost estimates of the current period with the cost figures of the previous period. Spending less
(4) Determining the selling price The producer can easily determine the selling price of the article, because the cost sheet gives him complete information about the total cost of the item.
(5) Fixing the Tender Price Tenders can be filled by the institution only when there is a maximum accurate estimate of the cost of the institution. Tender can be cost and price based only by comparative and analytical study of previous cost sheets.
(6) The production efficiency checks are prepared for the use of cost-sheet managers only. Based on the information provided in them, the manager obtains knowledge of the efficiency of the workers. If production capacity falls, it can be controlled.
(Advantages of Cost sheet)
(1) Help in determining the tender price
With its help, the tender price can be easily determined.
(2) Guidance to Manufacturer and Managers
With its help, manufacturers and managers get important information regarding the costs of the commodity, which are increasing the costs which need to be controlled.
(3) Knowledge of total cost and cost per unit (Computation of Total Cost and Cost per Unit) –
By this, the cost of total production made in a given period becomes known.
(4) Finding the portion of different expenses on each unit of production (Computation of Part of Different Expenses on Production of Every Unit)
By this, it can be known from the facility that which part of different expenses have been spent on each unit of production.
(5) Helpful in comparative study of cost data (Helpful in Comparative Study of Costing Data) –
By this, it can be easily found that the cost expenditure is increasing and which cost expenditure is decreasing by comparing it with the cost numbers of the previous period or periods.
(6) Helpful in Determination of selling price
Easily determine the sale price of the item with the help of producer cost sheet
Can, because the cost sheet gives complete information about the cost per unit of the item
The meaning of integrated articles
(Meaning of Integrated Accounts) –
Such a system of integrated accounting in which financial accounts and cost accounts are at the same time ..
Accounts are kept in books. Unified accounts are called. Under this system, accounts are kept in such a way that the detailed cost of goods produced can also be known. Also, detailed information is received regarding cash debtors’ expenses etc.
According to the Institute of Cost and Management Accountants, England, “Integrated accounting is a method of ensuring that all related expenses are included in cost accounts.
Financial and cost accounts are interlinked. “
Thus it can be said that the integrated accounting method refers to the accounting method in which financial and cost transactions are accounted for in a single ledger, which is called an integrated ledger, and by them, every item, subtitle, process Cost. After analyzing the profit and loss account and the economic letter is prepared to know the collective status of the business.
Accounts and accounts of integrated accounting system:
(Ledger and Accounts in Integral Accounting System)
(1) Overheads Control Account
Separate control accounts can also be opened for factory, office and administration, sales and distribution overheads or an overhead control account can also be opened for everyone. The current work account is debited from the factory overhead and this account is credited. The profit and loss account is debited from the administration overhead and this account is credited. The cost of sales from sales and distribution overhead is debited to the account and credited to this account.
(2) Cost of Sales Control Account –
The cost of goods sold is debited to this account and credit to the manufactured goods control account
It is debited from the initial balance and production expenses and credited to the cost of manufactured goods. The remainder carry over to the following year. This subtask takes the place of the account. .
(3) Wages Control Account –
It is debited from the amount of wages paid and earned and the current work account is credited. For indirect wages, the overhead control account is debited and the wage control account is credited.
(8) General Ledger
Control accounts of all the above mentioned subsidiary books are kept in this ledger, as well as complete financial accounts like cash account, capital account, permanent assets account, etc. are kept. There is no need to open a cost ledger control account and a general ledger adjustment account. Following are the main accounts kept in this ledger: –
(i) Stores Ledger Control A / c)
(ii) Work-in-Progress Ledger Control A / c)
(iii) Stock Ledger Control A / c)
(iv) Wages Control A / c)
(v) Separate control account for each overhead
(vi) Debtors Control A / c)
(vii) Creditors Control A / c)
(viii) Share capital account, cash account, bank account, account of each permanent asset, depreciation provision account, discount account (Discount A / c), unpaid expense account, prepaid expense account, profit-loss account, etc. other accounts.
Non – diary entries unified and integrated accounting systems (Journal Entries in Non-integral and integral accounting system)
Newsletter entries under non-integrated and integrated accounting methods are displayed in the following table.
Meaning and definition of cost control accounting
(Meaning and Definition of Cost Control Accounting)
Cost-control accounting system refers to such a system. In which two groups of accounting books are kept. One group deals with financial accounts and the other group deals with cost accounts.
Small producers do not keep financial and cost accounts separately. They prepare financial accounts as well as cost related articles. For this, detailed accounts of various expenses, labor, material etc. are kept. Such small producers manufacture one or two items, working in this method saves time, labor and expenses. But large producers have to keep both types of accounts separately.
B. K. According to Bhar, “Under un-integrated accounting system, separate books are kept for cost and financial accounts. The Cost Accountant is responsible for recording the cost practices. While the financial accountant is in charge of the financial records. “
(Cost Control Accounts) .
1) Cost Of Salcs Account
This account is debited at the cost of goods manufactured and sold, and the sales and distribution expenses are also debited to this account. The total sales amount is credited. The profit of the sale is debited to this account and the cost benefit is transferred.
(2) Costing Profit and LOSS Account
This account is credited with the amount of daily profit, abnormal profit (Abnormal nine high growth credit to this account and debit to this account for abnormal losses such as abnormal decay head salary etc.) Overhead adjustment account balance or overhead. Office The balances of overhead and sales and distribution overhead accounts are also transferred. Finally, the net profit or net loss cost is transferred to the ledger control .