Introduction to cost accounting and overheads. Easy explation and definations also.

1. NAME- OMPRAKASH SAH
Cost Accounting

2. Cost Accounting
Cost accounting is a process of collecting, analyzing,
summarizing and evaluating various alternative courses
of action. Its goal is to advise the management on the
most appropriate course of action based on the cost
efficiency and capability. Cost accounting provides the
detailed cost information that management needs to
control current operations and plan for the future.

4. Cost Accounting v/s Financial Accounting

5.  Financial accounting aims at finding out results of
accounting year in the form of Profit and Loss Account
and Balance Sheet.
 Financial accounting reports the results and position of
business to government, creditors, investors, and
external parties.
 Cost Accounting is an internal reporting system for an
organization’s own management for decision making.

6.  In financial accounting, cost classification based on type of
transactions, e.g. salaries, repairs, insurance, stores etc. In cost
accounting, classification is basically on the basis of functions,
activities, products, process and on internal planning and control and
information needs of the organization.
 Financial accounting aims at presenting ‘true and fair’ view of
transactions, profit and loss for a period and Statement of financial
position (Balance Sheet) on a given date. It aims at computing ‘true
and fair’ view of the cost of production/services offered by the firm.

7. Elements of cost
Basic cost elements are:
Raw materials
Labours
Expenses/overhead

8. 1) Material (Material is a very important part of business)
 Direct material/Indirect material
2) Labour Direct
 Labour/Indirect labor
3)Overhead (Variable/Fixed)
1) Production or works overheads Factory Staff
2) Administration overheads Office Staff
3) Selling overheads - Catalogues, Advertising, Exhibitions,
Sales
4) Distribution overheads
5) Maintenance & Repair (Office equipment/Factory
machinery)

9.  Utilities Gas Electricity Water Rates
 Other Variable Expenses
 Salaries (Payroll - Wages, NI PAYE Pensions)
 Depreciation (Machinery/Office Equipment)
 Other Fixed Expenses