What is Cost accounting?
Cost accounting is a process of monetizing outflow of resources or loss of benefits in relation to certain aspect of the business for which user demands an information which is mostly used in decision making process. It is in the nature of humans to seek benefit in every activity they pursue. Due to the same […]
What is meant by Cost?
Cost is the monetary amount of resources or the consideration for using the resource invested or consumed or used up. In its most simplistic form cost is monetary measurement of resource outflow due to any reason. As cost is an information, user of information may require this information to be generated or processed as per […]
What is Idle time and its accounting treatment?
Idle time is the simply the time for which labour has been paid for but no work has been done. Whereas inefficiency arises when labour is actually engaged on production but output is not as expected or simply not 100%. Idle time may arise out of normal or abnormal situations and it is the situation […]
What is Cost classification and in how many ways can we classify cost?
Cost classification is a simple process in which we group or categorize costs on the basis of common characteristics. Grouping costs on the basis of their nature, form, source or any other attribution makes it really easy to understand their effects and ultimately to take decisions about costs and beyond any shadow of doubt classifying […]
Is depreciation expense a fixed cost or a variable cost?
Let’s revisit the terms Fixed cost and Variable cost and then we will discuss where depreciation cost/expense really fits. Fixed costs are such costs that do not change with the change in activity level (e.g. units produced) with in the relevant range. Where relevant range can be defined in terms of time or activity level. […]
What is the difference between Product cost and Period cost?
Product costs or Inventoriable costs are all such costs that form part of the inventory.These are basically such costs that relates directly to the products and are incurred to produce such products and also include the costs that are incurred to bring these products into saleable condition (or simply present location and condition). Examples are […]
Why LIFO is not permissible under IFRS?
After the revision of IAS 2 Inventories in 2003, LIFO was explicitly prohibited to be used by the entities following International Accounting Standards to prepare and present financial statements. Before this revision LIFO was available as allowed alternative i.e. an option if company wishes to use the inventory valuation method other than the preferred method. […]
What is Normal costing?
Right at the very start of cost accounting we understand that decision making is one of the crucial and an ongoing process in every organization. Managers have to decide about many things all the time and for this they need relevant and reliable information or to be specific complete information. This is where cost accounting […]
Can direct costs be fixed and indirect costs be variable costs?
Classifying costs as direct or indirect cost is one way of cost classification whereas classifying costs on the basis of their behaviour as fixed or variable costs is just another way of classification of costs. Both classifications are separate and must not be confused together. The cost that can be traced back to a product […]
What is Opportunity cost and why is it a Relevant cost as well?
Opportunity costs are defined to be the economic value of the benefit sacrificed under one alternative to avail the benefit under another alternative course of action. For example, company have the option of manufacturing either alpha or beta. As company does not have enough resources to manufacture both of them so it will have to […]
