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Concept of Cost Accounting


The term cost is very often used in day to day activities. The cost is the amount of resources given up in exchange for some goods or services.

American Institute of Certified Public Accountants defined cost as expanded or other property transferred, capital, stock issued, services performed or liability incurred in consideration of goods or services received or to be received.


Costing may be referred “as classifying, recording and appropriate allocation of expenditure for the determination of costs of products or services”.

Cost Accounting

The Institute of Cost and Works Accountants (ICWA) (UK) defines cost accounting as “the process of accounting for cost from the point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centers and cost units”. In its widest usage, it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of activities carried out or planned.

According to Wheldon “cost accounting is the application of accounting and costing principle methods are techniques in the ascertainment of costs and the analysis of saving or excess cost incurred as compared with previous experience or with standards”.

Cost Accountancy is the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability.