An Overview of Cost and Management Accounting

the P&L reports profit of the company as a whole; it does not tell management which product, service line or branch earned the profit and which one bled cash.

financial statements are post-facto; they report what already happened. They cannot, by themselves, guide future decisions on pricing, outsourcing, or capacity expansion.

financial accounting records expenses by nature (salaries, rent, electricity) but not by function (which department consumed how much). Managers cannot pin responsibility for cost over-runs.

Precise Meaning: The purchase price paid by the end buyer for the product or service.; Quick Example: A customer pays ₹45,000 for a sofa-set in a furniture showroom.

Precise Meaning: The total expenditure incurred by the manufacturer in producing the product or rendering the service.; Quick Example: The same sofa-set costs the factory ₹28,000 in wood, labour, polish, depreciation, etc.

Precise Meaning: The technique / process of ascertaining costs of a specific product, job or service.; Quick Example: The factory's exercise of working out that one sofa-set costs ₹28,000.

Precise Meaning: The system of identifying, measuring, recording, allocating and communicating cost information related to a product or service, in monetary terms.; Quick Example: Maintaining cost ledgers, allocation sheets and variance reports for the sofa factory.

Precise Meaning: The science, art and practice of a cost accountant — covering principles, methods and techniques of costing and cost accounting and cost control and cost audit. It is the umbrella discipline.; Quick Example: The full body of professional knowledge tested by ICoAI (Institute of Cost…