Cost Accounting : As per the syllabus of B.Com (Hons.) University of Delhi

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Cover Contents Preface Chapter 1: Cost Accounting—Introduction and Cost Concepts 1.1 Meaning of Cost Accounting 1.2 Objectives of Cost Accounting 1.3 Advantages of Cost Accounting 1.4 Cost Accounting and Other Branches of Accounting 1.4.1 Cost Accounting and Management Accounting 1.5 Concepts of Cost 1.6 Classification of Costs 1.6.1 Classification on the Basis of Time 1.6.2 Classification by Nature or Elements 1.6.3 Overheads 1.6.4 Association with the Product (Costs in Their Relation to Product) 1.6.5 Accounting Period-Wise Classification of Costs 1.6.6 Behaviour-Wise Classification of Costs 1.6.7 Functional Classification of Costs 1.6.8 Costs for Planning and Control 1.6.9 Costs for Analytical and Decision-Making Purposes 1.6.10 Other Costs 1.7 Establishing Cost–Output Relationship 1.7.1 Cost Unit 1.7.2 Cost Centre 1.7.3 Profit Centre 1.8 Methods of Costing 1.8.1 Process Costing 1.8.2 Specific Order Costing 1.9 Techniques of Costing 1.10 Elements of Cost 1.10.1 Material 1.11 Installation of a Costing System 1.11.1 Practical Difficulties in Installing a Costing System 1.11.2 Measures to Overcome Difficulties 1.12 Role of a Cost Accountant in an Organizaton Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Type Questions Exercises Chapter 2: Materials 2.1 Direct Materials 2.1.1 Meaning of Direct Material and Its Constituents 2.1.2 Indirect Materials 2.2 Puchasing Function 2.2.1 Objectives of Purchase Department 2.2.2 Methods of Purchasing 2.3 Purchase Procedure 2.3.1 Stage I: Indenting for Materials 2.3.2 Stage II: Issue of Tenders 2.3.3 Stage III: Receiving Quotations 2.3.4 Stage IV: Placing Purchase Orders 2.3.5 Stage V: Inspecting Stores Received 2.3.6 Stage VI: Receiving Stores 2.3.7 Stage VII: Passing Bills for Payment 2.4 Stores Functions 2.4.1 Main Objectives of Store Keeping 2.4.2 Duties and Functions of a Store Keeper 2.4.3 Centralized Stores 2.4.4 Imprest Stores 2.5 Bin Card 2.6 Classificaiton and Codificaiton of Materials 2.6.1 Some Important Methods of Codification of Materials 2.6.2 Advantages of Codification 2.7 Inventory Control 2.7.1 Meaning of Inventory Control 2.7.2 Techniques of Inventory Control 2.7.3 Economic Order Quantity (EOQ) 2.7.4 Quantity Discounts and EOQ 2.8 ABC Analysis 2.8.1 Steps Involved in ABC Analysis 2.9 VED Analysis 2.10 Pareto Analysis 2.11 FNSD Analysis 2.12 Two Bin System 2.13 Perpetual Inventory System 2.13.1 Advantages of Perpetual Inventory System 2.14 Continuous Stock Taking 2.14.1 Advantages of Continuous Stock Taking 2.15 Periodic Stock Taking System 2.16 Issue of Materials 2.16.1 Material Requisition Note 2.16.2 Bill of Materials 2.16.3 Material Return Note 2.16.4 Material Transfer Note 2.16.5 Kardex System 2.17 Costing of Materials 2.17.1 Stores Ledger 2.17.2 Materials Abstract 2.17.3 Stores/Materials Ledger Control Account 2.17.4 Puachases Journal 2.18 Costing of Incoming Materials 2.18.1 Pricing of Stores Receipts (Accounting for Direct Material Cost) 2.19 Cost of Outgoing Materials 2.19.1 Pricing of Material Issues 2.20 Pricing of Material Returns 2.20.1 Pricing of Materials Returned to Vendor 2.20.2 Pricing of Materials Returned to Stock Room 2.21 Material Losses 2.21.1 Scrap 2.21.2 Waste 2.21.3 Spoiled Work 2.21.4 Defective Work 2.22 Stock Audit 2.23 Material Turnover Summary Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Type Questions Exercises Exercises Chapter 3: Labour 3.1 Meaning of Labour Cost 3.1.1 Direct Labour Cost 3.1.2 Indirect Labour Cost 3.2 Accounting and Control of Labour Costs 3.2.1 Personnel Department 3.2.2 Work Study and Engineering Department 3.2.3 Time-Keeping Department 3.2.4 Payroll Department 3.2.5 Cost Accounting Department 3.3 Labour Remuneration 3.3.1 Principles of Labour Remuneration 3.3.2 Methods of Remuneration 3.3.3 Taylor’s Differential Piece-Rate Method 3.3.4 Merrick’s Differential Rate Scheme (or) Multiple Piece-Rate System 3.3.5 Gantt’s Task and Bonus Plan 3.3.6 Baum’s Differential Scheme (or) Milwakee Scheme 3.4 Premium Bonus Plans 3.4.1 Emerson’s Efficiency System (or) Empiric System 3.4.2 Bedauxe Scheme or Points Scheme 3.4.3 Barth Scheme 3.4.4 Halsey Scheme 3.4.5 Halsey–Weir Scheme 3.4.6 Rowan Scheme 3.5 Group-Bonus Plans or Schemes 3.5.1 Priestman’s Production Bonus Plan 3.5.2 Rucker’s Plan 3.5.3 Scalon Plan 3.5.4 Towne’s Gain-Sharing Plan 3.5.5 Budgeted Expenses Bonus 3.6 Incentive Plans for Indirect Workers 3.6.1 Principles Governing the Incentive Plan for Indirect Workers 3.6.2 Indirect Monetary Incentive Schemes 3.6.3 Monetary (Indirect) Schemes 3.7 Co-Partnenship 3.7.1 Other Non-Monetary Incentive Schemes 3.8 Labour Turnover 3.8.1 Causes of Labour Turnover 3.8.2 Avoidable Causes 3.8.3 Unavoidable Causes 3.8.4 Effects of Labour Turnover 3.8.5 Measurement of Labour Turnover 3.8.6 Cost-Labour Turnover 3.9 Idle Time 3.9.1 Causes of Idle Time 3.9.2 The Grouping of Categories According to Functions May Further be Classified as Follows 3.9.3 Accounting Treatment 3.9.4 Control of Idle Time 3.10 Overtime and Shift Work 3.10.1 Meaning of Overtime 3.10.2 Causes of Overtime 3.10.3 Disadvantages of Overtime 3.10.4 Control of Overtime 3.10.5 Accounting of Overtime Summary Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Questions Exercises Exercises Chapter 4: Overheads 4.1 Meaning and Definition of Overheads 4.2 Classification and Codification of Overheads 4.3 Collection of Overheads 4.3.1 Primary Distribution of Overheads 4.3.2 Secondary Distribution of Overheads 4.4 Absorption of Factory Overhead 4.4.1 Methods of Overhead Absorption 4.5 Over Absorption or Under Absorption 4.5.1 Reasons for Under-Absorption of Overheads 4.5.2 Reasons for Over-Absorption of Overheads 4.5.3 Accounting Treatment of Over-or Under-Absorbed Overheads 4.6 Administration Overheads 4.7 Accounting for Administration Overhead 4.7.1 Separate Cost Item 4.7.2 Apportionment of Administration Overhead to Manufacturing, Selling and Distribution Functions 4.7.3 Transferring Administration Overhead to Costing Profit and Loss Account 4.8 Control of Administration Overhead 4.8.1 Last Year’s Actual Overheads 4.8.2 Budgeted Overheads 4.8.3 Standards 4.9 Selling and Distribution Overhead 4.9.1 Selling Overheads 4.9.2 Distribution Overheads 4.9.3 Accounting for Selling and Distribution Overheads 4.10 Treatment of Certain Specific Items of Overheads in Costing 4.10.1 Packing Expenses 4.10.2 R&D Costs 4.10.3 Interest on Capital 4.10.4 Bad Debts 4.11 Capacity Related Terms 4.11.1 Capacity Levels 4.11.2 Capacity Costs 4.11.3 Capacity Ratios Summary Key Terms Question Bank Objective Questions Short Answer Questions Essay Questions Exercises Exercises Chapter 5: Activity-based Cost Allocation System 5.1 Meaning and Definitions 5.2 Key Terms 5.2.1 Cost Objects 5.2.2 Activities 5.2.3 Cost Pool 5.2.4 Cost Drivers 5.2.5 Cost Hierarchies 5.3 Salient Features of Activity-based Costing System 5.4 Implementation of Activity-based Costing System 5.5 Comparing ABC System with Traditional Costing System 5.6 Limitations of ABC System Summary Key Terms Question Bank Objective Questions Short Answer Questions Essay Questions Chapter 6: Methods of Costing—Unit Costing 6.1 Unit Costing 6.2 Features of Output Costing 6.3 Analysis of Cost 6.4 Cost Sheet 6.4.1 Historical Cost Sheet 6.4.2 Estimated Cost Sheet 6.4.3 Uses of Cost Sheet 6.4.4 Exclusion of Certain Items from Cost Sheet 6.5 Production Account 6.6 Difference between Cost Sheet and Production Account 6.7 Preparation of a Cost Sheet 6.7.1 Stock 6.7.2 Computation of Profit 6.8 Treatment of Scrap 6.8.1 Treatment of Spoilage and Defective Work 6.9 Preparation of Production Account 6.10 For Professional Courses Summary Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Type Questions Exercises Chapter 7: Methods of Costing—Job Costing and Batch Costing 7.1 Meaning and Definition of Job Costing 7.2 Features of Job Costing 7.3 Objectives of Job Costing 7.4 Procedure of Job Costing 7.4.1 Step 1: Pre-production Procedure 7.4.2 Step 2: Allotment of Job Number 7.4.3 Step 3: Issuance of Production Order 7.4.4 Step 4: Maintenance of Job Cost Card 7.4.5 Step 5: Collection of Costs 7.4.6 Step 6: Job Cost Analysis 7.4.7 Step 7: Job Cost Book-Keeping 7.4.8 Accounting for Work-in-Process 7.5 Batch Costing 7.5.1 Special Features of Batch Costing 7.5.2 Economic Batch Quantity (EBQ) 7.5.3 Economic Batch Quantity: Meaning and Method of Determination 7.5.4 Factors Determining EBQ 7.6 Back Flush Costing 7.6.1 Version 1 (Method 1) 7.6.2 Version 2 (Method 2) 7.6.3 Versions 3 (Method 3) Summary Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Questions Exercises Exercises Chapter 8: Methods of Costing—Contract Costing 8.1 Meaning and Definition of Contract Costing 8.2 Special Features of Contract Costing 8.3 Contract-Costing Procedure 8.3.1 Accounting for Material 8.3.2 Accounting for Labour 8.3.3 Accounting for the Use of Plant 8.3.4 Accounting for Overheads (Indirect Expenses) 8.3.5 Accounting for Sub-Contracts 8.4 Types of Contracts 8.4.1 Fixed-Price Contract with Escalation Clause 8.4.2 Cost-Plus Contracts 8.4.3 Advantages 8.4.4 Disadvantages 8.4.5 Incomplete Contracts and Profit 8.5 Guidelines to Assess Profit on Incomplete Contracts 8.6 Work-in-progress 8.7 Accounting Treatment Summary Key Terms Question Bank Objective Questions Short-Answer Questions Essay Questions Exercises Exercises Chapter 9: Methods of Costing—Process Costing 9.1 Meaning and Definition of Process Costing 9.2 Salient Features of Process Costing 9.2.1 Costs Flow From One Process to Another 9.2.2 Average Unit Cost Consumption 9.2.3 Not Distinguishable 9.2.4 Normal Spoilage 9.2.5 Equivalent Production Computation 9.2.6 Work-in-Progress (WIP) at Year End 9.2.7 Emergence of More Than One Product 9.3 Job Costing Vs. Process Costing 9.4 Process Losses and Gains 9.4.1 Normal Process Loss 9.4.2 Abnormal Loss 9.4.3 Abnormal Gain 9.5 Elements of Manufacturing Cost 9.5.1 Direct Materials 9.5.2 Direct Labour 9.5.3 Direct Expenses 9.5.4 Overheads 9.6 Equivalent Production 9.6.1 Procedure for the Determination of “Equivalent Production” 9.7 Joint Products and By-products 9.7.1 Joint Products 9.7.2 By-Products 9.7.3 Co-Products 9.7.4 Differences Between Joint Products and By-Products 9.8 Accounting for Joint Product Costs 9.8.1 Average Unit Cost Method 9.8.2 Method 2: Physical Measure Method 9.8.3 Method 3: Weighted Output Method 9.8.4 Method 4: Standard Cost Method 9.8.5 Method 5: Market Value Method (Sales Value Method) 9.8.6 Method 6: Realizable Value Method 9.9 Accounting for By-products 9.9.1 Cost Methods: The Following are the Cost Methods 9.9.2 Non-Cost Methods 9.10 Transfer Prices—Inter-process Profits 9.10.1 Inter-Process Profits 9.10.2 Advantages 9.10.3 Disadvantages Summary Key Terms Question Bank Objective Questions Short Answer Questions Essay Questions Exercises Exercises Chapter 10: Methods of Costing—Operating Costing (Only Transport) 10.1 Meaning of Operating Costing or Service Costing 10.2 Features of Service Costing 10.3 Users of Service Costing 10.4 Cost Unit 10.5 Cost Analysis 10.6 Transport Costing 10.6.1 Objectives of Motor Transport Costing 10.6.2 Collection of Cost Data 10.6.3 Records 10.7 For Professional Courses 10.8 Operation Costing Summary Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Questions Exercises Exercises Chapter 11: Non-integral Accounting System and Reconciliation 11.1 Book-keeping in Cost Accounting 11.2 Non-integral System 11.2.1 Cost Ledger Control Accounts 11.2.2 Cost Ledger Adjustment Account 11.3 Illustrated Entries 11.4 Need for Reconciliation 11.5 Causes of Difference 11.5.1 Items Shown Only in Financial Accounts 11.5.2 Items Included in Cost Accounts Only 11.5.3 Items Treated Differently in Cost Accounts and Financial Accounts 11.6 Procedure for Reconciliation of Cost and Financial Accounts 11.6.1 Proforma: Reconciliation Statement 12.6.2 Memorandum Reconciliation Account Summary Key Terms Question Bank Objective Type Questions Short Answer Questions Essay Questions Exercises Exercises Chapter 12: Integral Accounting System 12.1 Meaning of Integrated Accounting System 12.2 Advantages of Integral System of Accounting 12.3 Disadvantages 12.4 Pre-requisites for Successful Integrated System of Accounting 12.5 Accounting Treatment 12.6 The Third Entry Method 12.7 Interlocking Vs. Integration of Cost and Financial Accounts Summary Key Terms Question Bank Objective-Type Questions Short Answer Questions Essay Questions Exercises Solved Question Papers 2006—B.Com (Hons)/Part II/NS Paper IX—Cost Accounting 2007—B.Com (Hons)/Part II Paper IX—Cost Accounting 2008—B.Com (Hons)/II/NS Paper IX—Cost Accounting 2009—B.Com (Hons)/II Paper IX—Cost Accounting 2010—B.Com (Hons)/II Paper IX—Cost Accounting