Sixth Semester Notes (Commerce) Cost Accounting Free Pdf Download Kashmir University


UNIT – I B.COM 5th Semester (SW)
The widespread interest in the subject of cost accounting could be said to have developed with
Industrial Revolution which started in 1760. As mechanization, simplification, standardisation and mass
production followed in the wake of factory system, costing had to keep pace with these developments.
Until the 18th century, cost accounting was in the domain of the engineer. Its integration with financial
accounting began when accountants started to audit the cost records. Under the influence of financial
accountant, cost accounting came to be viewed almost exclusively as a means of inventory valuation
and profit measurement. It has grown only in the 20th century as an independent discipline. Cost
accounting has found to be of assistance to management, in compiling and providing requisite statistical
data. It has developed rapidly and assisted management in providing valuable information to take
appropriate decision in time. Cost Accounting throws light on the excessive waste of materials,
inefficient labour operations, idle machinery and many other similar factors, which are responsible for
reduction in the profit of the business activities. Managements found that cost accounting could render
valuable assistance in planning, controlling and coordinating the activities.
(a) Costing: The institute of Cost & Management Accountants (ICMA) London has defined costing as
the ascertainment of costs, costing includes techniques and processes of ascertaining costs.
(b) Cost Accountancy: The Institute of Cost and Management Accountants (ICMA) London has defined
Cost Accountancy as the “application of costing and cost accounting principles, methods and
techniques to the science, art and practice of cost control and ascertainment of profitability as well
as presentation of information for the purpose of management decision making”.
Accordingly Cost Accountancy includes costing, cost accounting, budgetary control, cost control
and cost audit. Cost accounting refers to the process of determining and accounting the cost of
some particular product or activity. It also includes classification, analysis and infers production of
(c) Cost Accounting: The I.C.M.A. London defines Cost Accounting as “the process of accounting for
cost from the point at which expenditure is incurred or committed to the establishment of its
ultimate relationship with cost centers and cost units”.
In practice, costing, cost accounting and cost accountancy are often used interchangeably. Costing
refers to ascertainment of costs, accumulation and measurement of cost of activities, processes,
products or services. Cost data are used to prepare the statement of cost or cost sheet. Cost
Accounting is a specialized branch of accounting which assists management to control costs and to
create an awareness of the importance of cost to wells- being of the business organization.
Systematic and useful cost data and reports are required to manage the business to achieve its
(d) Cost Centre: Cost Centre is a location, person or an asset for which costs can be ascertained and
used for the purpose of cost control. It is an organizational segment or area of activity used t

WhatsApp Group Join Now
Telegram Group Join Now

Leave a Comment