COST ACCOUNTING – Meaning and Definition
Cost accounting is the recording of the expenses incurred in manufacturing a product or rendering a
service. It is done in such a manner that the expenses are accumulated, recorded, classified and
allocated so that the actual cost of any particular process or unit of production or service rendered can
be determined with a desired level of accuracy. It is the process of accounting for cost which begins with
recording of expenses and ends with the preparation of periodical statements and reperts for
ascertaining costs.
J.M. Fregman defines cost accounting as fthe process of recording, classifying, allocating and reporting
various costs incurred in the operations of an emerpris”.
COST ACCOUNTANCY – Meaning and Definition
Cost accountancy is the accounting of cost and revenue by applying the cost accounting principles and
methods for controlling the cost and ascertaining the profitability. The term cost accountancy is wider
and broader in coverage than cost accounting. It includes cost control, cost reduction, cost audit and
presentation of information to managerial personnel for the purpose of decision making.
The Institute of Cost and Management Accountants (ICMA) London defines Cost accountancy as “the
application of cost accounting principles, methods and techniques to the science, art and practice of
cost control and ascertainment of profitability as well as presentation of information for the purpose of
managerial decision making. “
Objectives / Functions / Purposes / Need of Cost Accounting
Requirements of management are varied. But financial accounting fails to provide answers to all their
problems. Cost accounting, to a great extent, succeeds in providing solutions to the problems of the
management. The main objectives of cost accounting
• Cost recording
Cost recording refers to recording of cost transactions in cost books. It is recorded such a way that, it
helps to ascertain the cost of products manufactured or services rendered.
