Scope of Cost Accounting

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Cost accounting is that type of accounting in which in total we try for cost-effectiveness in the organization
• Cost analysis
It helps in determining the cost in an organization that how much cost is incurring in a financial year.
Example: Company looks over the costs department wise.
• Cost audit
Helps in assessing the cost sheets.
Example: In the end cost sheets are assessed by the company and auditing of the company is done by the accountants.
• Cost comparison
Help in comparing the costs may be in the different departments or the other competitors.
Example: Top firms do look over the cost sheets of their competitors.
• Cost control
Helps in further controlling the costs so that business operations are more successful and effective.
Example: Top management stops the production of the product which was incurring high cost with low profits.
• Cost report
In the end, helping in preparing a final cost report so that the top management could take some action on making the business operations effective.


• Elimination of losses and inefficiency
A good cost accounting system eliminates wastes, losses, and inefficiencies by fixing standards for everything.
• Cost reduction
New and improved methods of production are followed under the cost accounting system. It leads to cost reduction
• Decision making
Based on cost information, the management can decide whether to make or buy a product in the open market. The management can rightly choose the best out of many alternatives. Sometimes, spare capacity can be used profitably.
• Reason for profit and loss
A good cost accounting system highlights the reasons for increasing or decreasing profit. If so, the management can take remedial action to maintain the profitability of the concern. There is no possibility of shutting down of any product or process or department
• Price fixation
The total cost of a product is available in the costing records. It is highly useful for the price fixation of a product.


• Expensive
Installing and maintaining a cost accounting system requires more manpower and resources. More analysis, allocation, and absorption of overheads require a considerable amount of additional work.
• Complex
Cost accounting needs to identify the different types of expenses and allocation of expenses is considered as a complicated system of accounting
• Lack of accuracy
The use of notional costs such as standard cost estimated cost, etc would not bring out the actual cost of the product. So the cost accounting lacks the accuracy of its results.
• Does not control cost by itself
Cost accounting will not control the cost. It only brings out the possibility of areas that needs control.
• Not suitable for small scale units
Small firms do not have much capital to invest in cost accounting so cost accounting becomes less suitable for them and also they have their own traditional methods control the costs effectively.


Cite this paper

Scope of Cost Accounting. (2020, Sep 19). Retrieved from https://samploon.com/scope-of-cost-accounting/



What is nature and scope of cost accounting?
The nature of cost accounting involves the collection, analysis, and interpretation of financial data to help businesses make informed decisions about their operations. The scope of cost accounting encompasses various areas, including cost control, budgeting, pricing, and performance evaluation.
What is the scope and objective of cost accounting?
The objective of cost accounting is to assist managers in decision-making by providing costing information. The scope of cost accounting includes the collection, analysis and reporting of financial information.
What is the scope of accounting?
The scope of accounting can be divided into two broad categories: financial accounting and management accounting. Financial accounting focuses on the financial statements and reports that are prepared for external users, such as shareholders and creditors. Management accounting focuses on the information that is prepared for internal users, such as managers and executives.
What is the scope of cost accounting PDF?
The SDGs were promoted by the United Nations.
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