No effect of changes in their value is recorded in the books after its acquisition. For linking up of production with the expenses the different techniques of costing such as Marginal Cost Technique, the Total Cost Technique, Direct Cost Technique etc. So the fixed costs are deducted from the contribution to find out the profits. The frequent preparation of reports and statements help in knowing solvency position of the business. The other areas where cost accounting department is helpful in manufacturing process are : a Engineering department which is concerned with designing a product, b Research and development department which is concerned with development of a new product, c Production planning and control department which ensures completion of production within the time schedule, and d Quality control section, which ensures quality of products. Okafor 1998:20 observed that crude oil or the petroleum sector in the last fifteen years has provided the nation with resources for unprecedented economic development and growth, yet the nation could have achieved more than these had she planned better and executed her plans more efficiently and effectively. What do you mean by installation of costing system? But by carefully designing the system so as to suit the business, the criticism can be nullified.
This is on account of the additional responsibilities arising from the various branches of accounting, works organisation, office management and administration, methods of statistical analysis, systems analysis, O and M studies, modern principles of management, use of computers, etc. Whatever may be the structure of cost accounting department in a factory, it is established to serve the following purposes : i To compile cost data in order to meet the statutory requirement wherever applicable, ii To provide necessary cost data to management to carry out its functions efficiently, and iii To ensure efficiency and economy in the functioning of cost accounting department. However, he believed that most accountants work independently as single proprietors; many others work for public accounting firms that very greatly in size and scope of services. This enhances the smooth running of the programme. Thus, it relates to the use of accounting data collected with the help of financial accounting and cost accounting for the purpose of policy formulation, planning, control and decision-making by the management.
Thus, it has nothing to do with their realizable or replaceable value. On the other hand, the main objective may be identified as taking decisions on the basis of financial information supplied by accounting. The defect does not lie in the costing system but for some other reasons such as indifferent attitude of the management, lack of adequate facilities, non-cooperations or opposition from employees. Internal Audit: This includes the development of a suitable system of internal audit for internal control. However, control over cost is exercised through the techniques of budgetary control and standard costing. Accounting is an information system: Accounting is recognized and characterized as a storehouse of information.
Constant comparison of actual result with standard result enables to spot out areas of inefficiency. Secondly is the service he renders to both the government and to the general public, during the programme. Cost accounting is a branch of knowledge : Though considered as a branch of financial accounts, cost accounting is one of the important branch of knowledge, i. Under financial accounts, assets are shown at the actual or historical cost. But management of every business organisation is interested to know much more than the usual information supplied to outsiders.
To help in supervising the working of punched card accounting or data processing through computers. Internal reporting presents details of cost data in a summarized and aggregate form. In case of inefficient operation remedial measures can be taken to improve the business. The objective of this method is to ascertain the total cost as well as the cost per unit. Estimation is also based on the future conditions and much depends on guesswork. Office Services: This includes maintenance of proper data processing and other office management services, communication and best use of latest mechanical devices.
Analytical tools such as Comparative Financial Statements, Common-size Statements, Trend percentages, and ratio Analysis are used and likely trends are projected. For example, in the case of a bus company, operating costing indicates the cost of carrying a passenger per kilometer. Management accounting makes use of the cost accounting concepts, techniques and data. Donald further explained that once identified, the economic event called transactions must be measured in financial terms, that is quantified in naira and kobo. Kell 1992:8 observed that the private accountant performs many functional roles within the organization. An accountant can track, analyze and record the cost of food supplies, cocktail ingredients, beverages and other products on your menu. Question 4: Illustrate the limitations of Financial Accounting? Determination of selling price : Every business organisation aims at maximising profit.
It aims at guiding the actual performance towards the line of targets; regulates the actual if they deviate or vary from the targets; this guidance and regulation is done by an executive action. Cost accounting is a branch of financial accounts. For the successful functioning of the costing system, the following conditions are essential : a There must be an efficient system of material control. Accounting information — Designing both manual and computerized data processing systems. Very often the managers show hostile attitude towards the costing system.
According 60 Osuagwu 1998:10 among the professional accountancy bodies of which Nigerians are members include: I. Even in this situation cost accounts disclose the margin of profit that is earned by comparing the market price and cost of production. To ascertain the profitability of each of the products and advise management as to how these profits can be maximised. It does not deal with non-monetary information of non-financial aspect. It all depends upon the nature of business and type of product manufactured by it.
It facilitates full utilisation of services of costing staff. An estimate is a forecast of the probable cost of a product, job, or process for a future date. To account for labour cost, employee time card and labour cost card were devised by Mr. Other tools such as time series, regression analysis, sampling techniques etc. To ascertain the cost of such services, composite units like passenger kilometers and tone kilometers are used for ascertaining costs.
Such an analysis is necessary to decide the method of costing to be adopted. No doubt other factors are taken into consideration before fixing price such as market conditions the area of distribution, volume of sales, etc. Cost accounting is a system of operational analysis for management. If management is not interested in costing information, there should be no costing department. Cost accounting department and finance department : The finance department is concerned with receiving and disbursement of cash.