Cost Accounting
Cost Accounting provides data for management accountant to use
Concerned with
- Collecting cost data
- Preparing statements
- Applying costs to inventory, products and services
Cost accounts are used to calculate
- Cost of goods or services produced
- Cost of department
- Revenue earned
- Profitability of product etc.
- Selling price
Cost Classification
By Element and Nature
- Materials
- Direct (can be traced in full to the product)
- Indirect (incurred in the course of making a product but cannot be traced directly and in full to the product or service)
- Labour
- Direct
- Indirect
Value of inventory
Future costs (budgeting)
- Budgetary control (variance)
Cost Classification
• By Element and Nature
- Materials
• Direct (can be traced in full to the product)
• Indirect (incurred in the course of making a product but cannot be traced directly and in full to the product or service)
- Labour
• Direct
• Indirect
Overheads
-Direct
- Indirect
By function
Production - Changed to goods (included in stock valuation)
Non-production - Changed to period
Admin
Selling
Distribution
Research etc.
Fixed or variables
Another way of classification is:
Fixed Cost
- Costs that do not change with level of activity
Variable Cost
- Costs that tends to vary with level of activity
Semi-Variable
Part fixed and part variable
Stepped Cost
Fixed up to a certain level of activity, rise and stays fixed again until another level
Direct Materials + Direct Labor + Direct Expenses = Prime Cost
Indirect Materials + Indirect Labor + Indirect Expenses = Overheads
Prime Cost + Overheads = Total Cost
Variable cost
Give Journal entries for the following Cash transactions
1. Buy goods for resale cosisig RO 1000
2. Sell Goods for RO 200
3. Pay electricity bill RO 120
4. Buy a delivery van RO 650
5. Buy petrol costing RO lb Iot*
Give Journal entries for the following Credit transactions
1. The business sells goods on credit to a customer ABC Ltd RO 2,500
2. The business buys goods on credit from a supplier XYZ Ltd IRO 125
Give journal entries for the following transactions 2016
Jan 1 Purchased goods for cash RO 5,000.
Jan 2 -Purchased goods on credit from Mr All RO 6,500
Jan 5 Rent paid RO 500
Jan 6 Commission received RO 1,000
Jan 7 Goods sold for cash RO 1,500
Jan 8 Sold goods on credit to Mr Aiman RO 2,500
Jan 9 Paid cash to Mr All in full settlement of his account RO 6,450
Jan 10 Cash received in full settlement from Mr Aiman RO 2,460
List the debit and credit entries for the following transactions:
1. Proprietor introduces capital RO 20,000
2. Bought a machine on credit from Mr Swann, cost RO 8,000
3. Bought goods on credit from Paul Ltd, cost RO 500
4. Paid wages RO 4,000
5. Received rent RO 700
10. Journalize the following transactions:
2016
Jan 1 Mr. Yahya started business with OMR 100,000
Jan 2 Amount deposited in bank OMR 75,000
Jan 3 Goods purchased on credit OMR 24,000
Jan 3 Purchased goods for cash OMR 15,000
Jan 4 Sold goods costing for OMR 30,000 cheque received
Jan 5 Furniture purchased OMR 5,000 for cash
Jan 6 Paid rent OMR 1,200 for cash
Jan 7 Commission received OMR 2,000 in cash