Archive | Cost Accounting

The purchase department plays a very important role in an organisation because purchasing has its effect on every vital factor concerning the manufacture, quality, cost, efficiency and prompt delivery of goods to customers.

When the purchasing function is entrusted to a single person, it is said to be centralized purchasing. It means all purchases are made by the Purchasing Officer.

Bin card is a record of receipt and issue of materials Quantity of store received is entered with receipt column and the quantity of store issued is recorded in the issue column of Bin Card.

Progressive organisations recognize purchasing as an important function and establish a separate purchase department to look after this function.

Following are the different types of purchasing or classes of buyers:

Purchasing is a service function but it is an independent activity of an organisation. In popular sense, it refers to an act of buying at a price.

Very often a producer in response to an advertisement of a tender in the press is required to quote prices for the supply of the commmodities he produces or for completing a job.

The main purposes or advantages of cost sheet are:

Cost sheet is a statement of cost. In other words, when costing information are set out in the form of a statement, it is called cost sheet.

Overheads may be defined as the aggregate of the cost of indirect materials, indirect labor and such other expenses including services as cannot conveniently be charged direct to specific cost units.

All expenses which can be identified to a particular cost centre and hence directly charged to the centre are known as direct expenses.

Direct labor is all labor expended in altering the construction, composition, confirmation or condition of the product.

Direct materials are those materials which can be identified in the product and can be conveniently measured and directly charged to the product.

Cost classification is the process of grouping costs according to their common characteristics.

These are the following concepts used in cost accounting:

Following are the main types or techniques of costing for ascertaining costs: