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Accounting For Managers - Cost Estimation And Control-Cost Accounting

Distinction Between Costing And Cost Accounting

   Posted On :  03.05.2018 10:49 pm

Distinction Between Costing And Cost Accounting

Distinction Between Costing And Cost Accounting
 
 
Costing is the technique and process of ascertaining costs. It tries to find out the cost of doing something, i.e., the cost of manufacturing an article, rendering a service, or performing a function. Cost accounting is a broader term, in that it tries to determine the costs through a formal system of accounting (unlike costing which can be performed even through informal means). Stated precisely, cost accounting is a formal mechanism by means of which costs of products and services are ascertained and controlled. The institute of cost and management accountants, u.k. define cost accounting as: the application of accounting and costing principles, methods and techniques in the ascertainment of costs and the analysis of savings and/or excesses as compared with previous experience or with standards. It, thus, includes three things:
ՖՖ                     Cost Ascertainment: finding out the specific and precise total and unit costs of products and services.
 
ՖՖ                     Cost Presentation: reporting cost data to various levels of management with a view to facilitate decision making.
 
ՖՖ                     Cost Control: this consists of estimating costs for production and activities for the future, and keeping them within proper limits. Budgets and standards are employed for this purpose.
 
Cost accounting also aims at cost reduction, i.e., achieving a permanent and real reduction in cost by improving the standards. Cost accountancy is a comprehensive term that implies the `application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control’. It seeks to control costs and ascertain the profitability of business operations.

 

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