Does Standard costing means costing based on cost accounting standards like financial accounting standards?

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Standard costing does not mean cost accounting using uniform cost accounting standards similar to financial accounting standards.

The main purpose of financial accounting standards is to have such set of financial statements for every entity that is comparable with other entity’s financial statements and also to have uniform basis of accounting for different transactions that can be reported in number of ways thus can cause confusions. Also to have such financial statements that can be used by wide range of users and also capable of fulfilling general information needs of the users of financial statements

In cost accounting as users are limited in number and thus their needs are specific therefore, we cannot have internationally uniform cost accounting standards even if we want too. Also, by standardising the cost accounting we might impair its abilities which are much helpful in decision making. Therefore, having standards of cost accounting is out of question.

Standard costing is simply a technique in which costs are determined using planned or budgeted basis. In standard costing system management simply establishes an expectation about the costs to be incurred based on the information gathered and planned activities. Establishing an expectation about how much costs should be incurred actually helps management to control the process in a better way as standard costs work as a benchmark to be attained and then maintained and improved further.

Summary
Standard costing is a technique in which different costs are determined in advance and then used for control purposes. Standard costing does not mean standardised costing or it does not imply cost accounting standards in the footsteps of financial accounting standards
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Teaching professional business subjects to the students of FIA, ACCA, CIMA, CA etc. He also found ACCA LIVE which is Pakistan's first portal to provide online classes and distance learning solutions to FIA/ACCA students. At PakAccountants.com he is busy making study material for different qualifications. Beside writing articles he answers questions asked using ASK TUTOR!

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