Meaning Of Costing And Cost Accounting

Meaning Of Costing And Cost Accounting

Costing is a technique and process of ascertaining costs.  This technique consists of principles and rules which govern the procedure of ascertaining the cost of products/services.  The process of costing includes routines of ascertaining costs by historical or conventional costing, standard costing or marginal costing.

Cost accounting is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products/services, and for the presentation of suitably arranged data for purposes of control and guidance of management. It includes the ascertainment of the cost of every order, job, contract, process, service or unit as may be appropriate.  It deals with the cost of production, selling and distribution.  It is thus the provision of such analysis and classification of expenditure as will enable the total cost of any particular unit of production or service to be ascertained with reasonable degree of accuracy and at the same time to disclose exactly how such total cost is constituted (i.e. the value of material used, the amount of labour and other expenses incurred) so as to control and reduce its cost.  According to Wheldon, “Cost Accounting is the application of accounting and costing principles, methods and techniques in the ascertainment of costs and the analysis of saving/or excess cost incurred as compared with previous experience or with standards”.  Thus, cost accounting relates to the collection, classification, ascertainment of cost and its accounting and control relating to the various elements of cost.  It establishes budgets and standard costs and actual cost of operations, processes, departments or products and the analysis of variances, profitability and society use of funds.

Cost Accountancy is the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability.  It includes the presentation of information derived there from for purposes of managerial decision making.  Thus, cost accountancy is the science, art and practice of a cost accountant.  It is science because it is a body of systematic knowledge having certain principles which a cost accountant should possess for proper discharge of his responsibilities.  It is an art as it requires the ability and skill with which a cost accountant is able to apply the principles of cost accountancy to various managerial problems.  Practice includes the continuous efforts of a cost accountant in the field of cost accountancy.  Such efforts also include the presentation of information for the purpose of managerial decision making and keeping statistical records.