Scope of Cost Accounting
The following important tasks are included under the scope of cost accounting –
1. To keep a count of investments and to classify and analyze the investments – under cost accounting the total investment and investment per unit of the goods produced is found out and the total expenditure incurred right from production of goods to their distribution and sale is classified under Root Investment (evident material, evident labour and other evident expenditure), Workshop head, Office and Administrative head and Sales and Distribution head. At all these levels the different expenditures are compared to the expen-lditures during the previous time slot. In addition to this ecpenditures of each of the above mentioned types are compared to the standard costing and variances found out. If these variances are unfavourable then their causes are determined so that such expenditures can be controlled in future.
2. To determine the true profit – loss by cost ac-
counting and to match them with true profit-loss by commercial accounting to count the actual profit – loss on the basis of cost accounting the evaluation of raw materials,semi- manufactured goods or work in progress and finished goods can be easily done. Information about the various sources of profit and loss can be gotten by matching the actual profit loss by cost accounting with the actual profit – loss by commercial accounts.
3. To control investments – under cost accounting
investment in activities like proper control on purchase and issue of material, proper distribution of work load among labourers, motivational technique of distribution of wages among workers, best possible use of resources, establish standard investments, budgetary control etc. can be ascertained. In this way cost accounts convert losses into gains,give momentum to activities and keep damage at bay.
4. Measurement of work capabilities and profitability of different departments on the basis of the figures obtained from cost accounting the work capabilities andbprofitability of different departments can be easily gauged and using the Marginal Costing Analytical Method and bybtaking the right decision regarding the various departments at the right time the work efficiency and profit earning capacity of a department can be increased.
5. Present figures for determination of sales prices and tender costs and for determination of the future policies -cost accounts present the correct figures on the basis of which appropriate sales prices and cost oftenders can be ascertained and policies for future production and distribution policy can be decided.