Nature and Scope of Cost Accounting

These flashcards cover important vocabulary terms and definitions related to the nature and scope of cost accounting, its objectives, advantages, and limitations.

Cost Accounting

The classifying, recording, and appropriate allocation of expenditure for the determination of costs of products or services.

Financial Accounting

A branch of accounting primarily focused on record keeping and the preparation of Profit and Loss Accounts and Balance Sheets.

Cost Effectiveness

The ability of a business to achieve objectives while minimizing costs.

Cost Control

Guidance and regulation by executive action to manage and minimize costs.

Cost Reduction

Achieving a permanent reduction in the unit cost of goods or services without impairing quality.

Costing Techniques

Methods for ascertaining costs, including historical costing, standard costing, and marginal costing.

Objectives of Cost Accounting

To ascertain cost per unit, provide analysis of costs, disclose sources of wastage, and assist in decision-making.

Advantages of Cost Accounting

Includes disclosing profitable/unprofitable activities, measuring efficiency, helping in decision-making, and guiding future business policies.

Limitations of Financial Accounting

Includes lack of cost data for decision-making, no control on costs, and provides only historical information.

Difference Between Costing and Cost Accounting

Costing is a technique of ascertaining costs, whereas cost accounting is a specialized branch that also involves cost control and analysis.

Cost Audit

Verification of the correctness of cost accounts and adherence to cost accounting plans.

Cost Accounting Standards Board (CASB)

An organization that develops cost accounting standards to guide practices and ensure compliance.

Objectives of Cost Accounting

To maximize profitability, control costs, provide data for pricing decisions, and support management planning and decision-making.