Cost Accounting II yr

A method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded. This data is then summarized and analyzed to arrive at a selling price, or to determine where savings are possible.
In contrast to financial accounting (which considers money as the measure of economic performance) cost accounting considers money as the economic factor of production.


COST

Cost is commonly defined as ‘sacrificed resource’ for a particular thing. If we buy a watch for Rs 3000, a number of Rs are considered to be the cost of that watch. Here, Rs 3000 are sacrificed to obtain a watch. It is the simplest example but cost can be of anything which is measurable in terms of money. For example, the cost of preparing one pizza which in itself include various other costs like cost of flour, other ingredients, labor, electricity and other overheads. Just the same way, cost of production of any product or service can be determined.


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