12 httpkafcoin 209 assignments 1 what are the

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12. 20.9 ASSIGNMENTS 1. What are the essential principles of good costing system. 2. A good costing system of costing serves as a means of control over expenditure and helps to secure economy in manufacture. Discuss 3. State and explain the difference between cost accounting and financial accounting. 20.10 SUGGESTED READINGS 1. Arora .M.N Cost Accounting Principles and Practice Vikas publishing House PVT Ltd 2. Jain and Narang Cost Accounting 3. Pillai R.S.N, Bagavathi Management Accounting S.Chand company 20.11 LEARNING ACTIVITIES 1. Meet a cost accountant and discuss with him regarding the objectives and principles of cost accounting. 20.12 KEYWORDS Costing, Cost Accounting, Cost Control, Management Accounting, Cost accounting, Financial Accounting,
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262 LESSON 21 IMPORTANCE OF COST ACCOUNTING 21.1 INTRODUCTION Compare with financial accounting, cost accounting is relatively a recent development. Cost accounting started as a branch of financial accounting, but now it is regarded as a system in its own right. The vital importance that cost accounting has acquired in the modern age is because of the growth of complexities in modern industry. Cost accounting has primarily developed to meet the needs of management. Cost accounting provides detailed cost information to various levels of management for efficient performance of their functions. 21.2 OBJECTIVES After completing this Lesson you should be able to know Importance of Cost Accounting Classification and elements of Costs Components of total cost 21.3 CONTENT 20.3.1 Importance of Cost Accounting 20.3.2 Installation of Cost Accounting System 20.3.3 Classification Of Cost 20.3.4 Elements of Cost 20.3.5 Items Excluded from Cost Accounts 20.3.6 Components of Total Costs 20.3.7 Adjustment for Inventories 20.3.8 Cost Sheet 21.3.1 IMPORTANCE OF COST ACCOUNTING 1. Costing helps in periods of trade depression and trade competition:- In periods of trade depression the business cannot afford to have leakages which pass unchecked. The management should know where economies may be sought, waste eliminated and efficiency increased. The business has to wage a wax for its survival. The management should know the actual cost of their products before embarking on any scheme of reducing the prices on giving tenders. Adequate costing facilitates this. 2. Aids in price fixation:- Though economic law & supply and demand and activities of the competitors, to a great extent, determine the price of the article, cost to the producer does play an important part. The producer can take necessary guidance from his costing records. 3. Helps in estimate:- Adequate costing records provide a reliable basis upon which tenders and estimates may be prepared. The chances of losing a contract on account of over rating or losing in the execution of a contract due to under rating can be
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263 minimized. Thus, “ascertained costs provide a measure for estimates, a guide to policy, a nd a control over current production”.
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