1.

Coursework title: Individual Assignment

2. Subject Code: MBAPML101

3. Subject Name: Accounting for Business Decision

4. Academic Year: 2018 June Start

5. Student First Name: VINOD

6. Student Last Name: KUMAR JAKHAR

7. Student ID No.: 180755118265

8. Student’s personal Email ID: vinod4dubai@gmail.com

Explain the Cost sheets and its Types?

COST SHEETS

Cost Sheet is a statement of cost. In other words, when costing information are set out in the form of a
statement, it is called Cost Sheet.

The preparation of cost sheet is one of the important and primary function of cost accounting. Cost sheet
is not an account. There is a prescribed form for the preparation of cost sheet. It is a detailed statement
of the elements of cost arranged in a logical order under different heads. It is prepared to show the
detailed cost of the total output for a certain period.

Cost sheet is prepared on the basis of :

I. Historical Cost - Historical Cost sheet is prepared on the basis of actual cost incurred. A statement of
cost prepared after incurring the actual cost is called Historical Cost Sheet.

II. Estimated Cost - Estimated cost sheet is prepared on the basis of estimated cost. The statement
prepared before the commencement of production is called estimated cost sheet. Such cost sheet is useful in
quoting the tender price of a job or a contract.

The importance of cost sheet is as follows:

 Cost ascertainment
The main objective of the cost sheet is to ascertain the cost of a product. Cost sheet helps in ascertainment
of cost for the purpose of determining cost after they are incurred. It also helps to ascertain the actual
cost or estimated cost of a Job.
 Fixation of selling price
To fix the selling price of a product or service, it is essential to prepare the cost sheet. It helps in fixing
selling price of a product or service by providing detailed information of the cost.
 Help in cost control
For controlling the cost of a product, it is necessary for every manufacturing unit to prepare a cost sheet.
Estimated cost sheet helps in the control of material cost, labour cost and overheads cost at every point
of production.
 Facilitates managerial decisions

1|Page
 It helps in taking important decisions by the management such as: whether to produce or buy a
component, what prices of goods are to be quoted in the tender, whether to retain or replace an existing
machine etc.

TYPES OF COST-SHEETS
The preparation of cost sheet depends on the cost data provided by cost accounting. Due to differences
in the nature of cost data there are three different cost sheet Performa may be used.
1) Cost-Sheet with Break up Cost:
These types of cost sheet contain two columns as the total cost, cost per unit of output. A specimen of
Cost-sheet with imaginary figure.
2) Cost-sheet with Treatment of Stock:
This type of Cost-sheet is maintained in case of manufacturing concern. Generally there are three types
of stock as:
(I) Stock of Raw material
(II)Stock of work in progress and
(III)Stock of finished goods.
The treatment of stock in Cost-sheet has been given in a separate Performa.
3) Estimated Cost-sheet or Price Quotation:
Price quotation means quoting the minimum price for obtaining a specific order. The quotation is
sending in the form or estimated Cost-sheet having one column. In estimated Cost-sheet all elements of
cost and overhead expenses are calculated in the following manner:
(I) Estimated direct material.
(II) Estimated labour cost.
III) Estimated overheads.

2|Page
Explain the term Cost Accounting. State its objectives and importance?

COST ACCOUNTING

Cost accounting refers to the process of recording, classifying, summarizing, allocating and analyzing the
different alternative measures to control costs. Its purpose is to guide the management on how to
control costs effectively and maximize productivity. It provides detailed information of the costs that
needs to be focused and find out the alternative course of actions to control the costs in the future.

Types of Cost Accounting

• Standard cost accounting: It is a method of alternating the estimated cost with an actual cost and
showing the periodic variances of the estimated cost with its actual costs.
• Activity-based costing: It is a method of identifying the activities performed by a company and
allocates the indirect costs to the products and services based on the actual consumption by each
product or service.
• Resource consumption accounting: It is a management theory that explains the comprehensive
management accounting approach which helps the management to make decisions for the company's
overall growth.
• Throughput accounting: It is an accounting approach which helps the management to make decisions
for the company's profitability growth.
• Life Cycle Costing: It is a measure used to analyze the pending and future costs and find out alternative
measure that would have a positive impact on such costs. It compares the initial investment possibilities
and evaluates the least cost courses of actions for a period of twenty years.
• Environmental Accounting: It is an accounting that identifies the use of natural resources, analyze the
costs associated with it and its impact on the environment and provides the detailed cost information
with alternative course of actions.
• Target Costing: It is an accounting method to evaluate the cost of product's life cycle which would be
effective, functional, qualitative and able to generate expected profit.

3|Page
OBJECTIVES OF COST ACCOUNTING
The main objective of cost accounting are mentioned below:
1. To ascertain cost: the main objective of cost accounting is to ascertain the cost of goods and services.
The expenses that are incurred while producing goods or rendering services are called costs. Some
examples of costs are material, labor and other direct and indirect expenses. Under cost accounting, cost
are collected, classified and analyzed with the aim of finding out the total as well as per unit cost of
goods, services, processes, contract etc.
2. To analyses cost and loss: another objective of cost accounting is to analyze the cost of each activity.
The analysis of cost is necessary to classify the cost into controllable or uncontrollable, relevant or
irreverent, profitable or unprofitable etc. similarly, under cost accounting the effects of material, idle
time, breakdown or damage of machine on the cost is also analyzed.
3. To control cost: cost control is a technique that is used to minimize the cost of product and services
without compromising on the quality. Cost accounting aims at controlling the cost by using various
techniques, such as standard costing and budgetary control.
4. To help in fixation of selling price: another important objective of cost accounting is to help in fixation
of selling prices. The costs are accumulated, classified and analyzed to ascertain cost per unit. The selling
price per unit is calculated by adding a certain profit on the cost per units. Under cost accounting,
different techniques such as job costing, batch costing, output costing services costing etc are used for
determine the selling price.
5. To aid the management: cost accounting aims at assisting the management in planning and its
importations by providing necessary costing information that also enable the evaluation of the past
activities as well as future planning.

IMPORTANCE AND ADVANTAGES OF COST ACCOUNTING

The importance and advance of cost accounting are presented below:
1. Helps in controlling cost: cost accounting helps in controlling cost by applying some techniques such
as standard costing and budgetary control.
2. Provides necessary cost information: it provides necessary cost information to the management for
planning, implements and controlling.

4|Page
3. Ascertains the total per unit cost of production: it ascertains the total and per unit cost of production
of goods and services that helps to fix the selling prices as well.
4. Introduces cost reduction programs: it helps to introduce and implement different cost reduction
programs.
5. Discloses the profitable and non profitable activities: it discloses the profitable and non profitable
activities that enable management to decide to eliminate or control unprofitable activities and expand
or develop the profitable activities.
6. Provides information for the comparison of cost: it provides reliable data and information which
enable the comparison of cost between periods, volume of output, determent and processes.
7. Checks the accuracy of financial accounts: it helps checking the accuracy of financial accounts. This is
done by preparing cost reconciliation statement.
8. Helps invests and financial institutions: it is also advantageous to investment and financial institutions
since it discloses the profitability and financial position in which they intend to invest.
9. Beneficial to workers: it is beneficial to workers as well since it emphasizes the efficient utilization of
labor and scientific systems of wages payment.

5|Page
Reference’s:
 Accounting: Tools for Business Decision Making, E.2011, Paul D. Kimmel
 Management Accounting for Business,E.2016 Colin Drury
 Singhania University-MBA Text Book, E.2017, Accounting For Business Decision
 https://www.accountingtools.com
 https://www.investopedia.com

6|Page