The Scope of Cost Accounting Is Very Wide and Includes:
- Cost Ascertainment: The main function of cost accounting is the ascertainment of cost of product or services rendered. It includes collection, analysis of expenses and measurement of production at different stages of manufacture. The collection, analysis and measurement requires different methods of costing for different types of production such as Historical costs, Standard costs, Process cost, Operation cost etc. It can be done in two ways, namely
- Post Costing, where the ascertainment of cost is done based on actual information as recorded in financial books.
- Continuous Costing, where the process of ascertainment is of a continuous nature i.e. where cost information is available as and when a particular activity is completed, so that the entire cost of a particular job is available the moment it is completed.
- Control of Costs: In the era of competition, the goal of every business is to sustain; in costs at the lowest point with efficient operating conditions. To sustain, it is essential to examine each individual item of cost in the light of the services or benefits obtained so that maximum utilization of the money expended or- it may be recovered. This requires planning and use of standard for each item of cost for locating deviations, if any, and taking remedial measures.
- Proper matching of cost with revenue: In cost accounting manager prepares monthly or quarterly statements to reflect the cost and income data identified with the sale of that period.
- Aids to Management Decision-making: Decision-making is a process of choosing between two or more alternatives, based on the resultant outcome of the various alternatives. A Cost Benefit Analysis also needs to be done. All this can be achieved through a good cost accounting system