Accounting concepts

Accounting Period Realization concept(revenue) Matching cost and revenue concept(profit=revenue-cost)

Accounting conventions

Convention of disclosure Convention of consistency Convention of conservatism Convention of materiality

Cost accounting
Specialized branch of accounting and developed because of limitation of financial accounting. The need for determination and control of costs necessitated new set of principles of accounting

Cost: institute of cost and work accountants, London) cost is defined as the amount of expenditure incurred on or attributable to a given thing

Costing: is the technique and process of ascertain cost. It consist of the principles and rules which are used for ascertaining the cost of products and services

Cost accounting:The process of accounting for cost from the point at which expenditure incurred or committed to the establishment of its ultimate relation with cost centers and cost units. It embraces the preparation statistical data,application of cost control method and ascertainment of profitability of activities carried out or planned

Objects and functions of cost accounting

# analysis and ascertainment of cost # presentation of cost for reduction and control #planning and decision making

Importance and advantages of cost accounting

Cost accounting as an aid to Management

Provides data regarding materials, labour, overheads and other expense Helps in price fixation Provides information regarding tender estimates It guides future production policies Helps to reduce wastage Determining profitable and unprofitable activities

Advantages to:

Employees (wage fixation/ascertainment) Creditors Government and society

Limitation of cost accounting

It is not an independent system It is largely based on estimates It sometimes become subjective(depreciation and valuation of closing stock) It does not consider all items of expenses and income(interest , discount on issue of capital)

Management accounting
Acc to ICWA(India) management accounting is a system of collection and presentation of relevant economic information relating to an enterprise for planning controlling and decision making

Acc to American Accounting Association

management accounting includes the methods and concepts necessary for effective planning , for choosing among alternative business actions and for control through the evaluation and interpretation of performances

Characteristics of management accounting

Providing accounting information Cause and effect analysis Use of special techniques and concepts Helps in decision making Achieving of objectives No fixed norms followed Increase efficiency Also consider forecasting elements

Scope of management accounting

Financial accounting Cost accounting Financial management Budgeting and forecasting Inventory control Reporting to management Internal audit Tax accounting

Advantage of management accounting

Planning and policy formulation Helpful in controlling performance Helpful in organizing Helpful in interpreting financial information Helpful in decision making Reporting to management

Limitations of management accounting

Based on accounting information Lack of knowledge Intuitive decisions Not an alternative to administration Top heavy structure Personal bias Evolutionary stage