Introduction to Cost Accounting

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Unit - 1 : Introduction to Cost Accounting
Structure of Unit:
1.0 Objectives
1.1 Introduction
1.2 Branches of Accounting
1.3 Emergence of Cost Accounting
1.4 Nature
1.5 Advantages
1.6 Importance
1.7 Installation of Cost Accounting System
1.8 Essential of a Good Cost Accounting System
1.9 Methods
1.10 Techniques
1.11 Cost Accounting vs. Financial Accounting
1.12 Limitations of Cost Accounting
1.13 Summary
1.14 Self Assessment Questions
1.15 Reference Books
1.0 Objectives
After completing this unit, you will be able to:
 To assertion and control cost.
 Determining selling price.
 Facilitating preparation of financial and other statements.
 To reduce cost.
 To provide base for operating policy.
1.1 Introduction
In the initial stages cost accounting was merely considered to be a technique for ascertainment of cost
of products or services on the basis of historical data. In course of time due to competitive nature of
the market, it was realized that ascertainment of cost is not as important as controlling costs. Hence, cost
accounting started to be considered more as a technique for cost control a s compared to cost ascertainment.
Due to technological development in all fields, now cost reduction has also come within the ambit of cost
accounting. Cost accounting is thus concerned with recording, classifying and summarizing costs for
determination of costs of products or services, planning, controlling and reducing such costs and furnishing
of information to management for decision making.
Meaning and Definitions of Cost Accounting
“Cost accounting is a quantitative method that accumulates, classifies, summarizes and interprets information
for three major purposes: (in) Operational planning and control ;( ii) Special decision; and (iii) Product
decision.” -Charles T. Horngren