In the last blog we began looking at cost accounting and mentioned that at various points in time of the discussion series we might temporarily take detours to get other related concepts relevant to the discussion. In today's blog we discuss the objectives of cost accounting.
A source on the internet defined cost accounting as: "Cost accounting is an expanded phase of the general or financial accounting of a business concern which provides management promptly with the cost of producing or selling each article or of rendering a particular service".
Thus, Cost accounting serves the following major objectives to achieve:
- Determining the Selling Price
- Controlling cost
- Providing information for decision making
- Ascertaining Costing Profits
- Facilitating preparation of financial and other statements
Since in our first blog we have mentioned that management relies heavily on decision making hence we would like to make specific mention that cost accounting would assist decision making by the manager in the following ways:
- Determination of cost-volume-profit relationship
- Make or buy decision
- Shut down or continue operations at loss
- Continuing with the existing machinery or replacing them by improved and economical machines.
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