Objectives of Cost Accounting
The main objectives of Cost Accounting are:
- To ascertain the Costs under different situations using different techniques and systems of costing
- To determine the selling prices under different circumstances
- To determine and control efficiency by setting standards for Materials, Labour and Overheads
- To determine the value of closing inventory for preparing financial statements of the concern
- To provide a basis for operating policies such as:
- Whether to operate at a loss or close
- Whether to manufacture or buy from market, etc.
Scope of Cost Accountancy
The scope of cost accountancy is wide and includes:
- Cost Ascertainment: To find out the cost of product/services rendered with reasonable degree of accuracy.
- Cost Accounting: The process of Accounting for Cost which begins with recording of expenditure and ends with preparation of statistical data.
- Cost Control: The process of regulating the action to keep the element of cost within the set parameters.
- (Preparing) Cost Reports: These are primarily prepared for use by the management at different levels and help in planning and control, performance appraisal, and managerial decision-making.
- Cost Audit: The verification of correctness of Cost Accounts and check adherence to the Cost Accounting plan.