COST ACCOUNTING NOTES SACHIN EDUCATION HUB pdf

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Nature of Cost Accounting | Scope of Cost Accounting | Cost Accounting vs Financial Accounting . Sachin Education Hub.

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20 Aug 2023 — 20 Aug 2023COST ACCOUNTING THEORY NOTES BY SACHIN SIR FOR BCOM/BBA 2ND YEAR SPECIALLY. . NOTE - REST OF THE SUBJECT NOTES WILL ALSO UPLOAD SOON. KEEP.

Cost Accounting Sachin Education Hub on REVIEWS ABOUT SACHIN EDUCATION HUB ONLINE CLASSES.

Session for all commerce students. . Sachin Sir directly through online classes. There would be 1 hour class. . Wednesday - Accounting queries.

P/V ratio (Profit-Volume ratio) measures contribution as a proportion of sales: P/V ratio = (Contribution/Sales) × 100. It indicates contribution per rupee of sales; a higher P/V ratio generally means better profitability.

Ways to improve P/V ratio (any two):

Increase selling price (without increasing variable cost proportionately).
Reduce variable cost per unit by better purchasing, reducing wastage, improving efficiency, or using cheaper materials. (Also, improving product mix towards higher contribution products increases overall P/V ratio.)

Hence, P/V ratio is useful for profit planning and comparison.

Overtime is work beyond normal hours. The overtime premium (extra over normal wages) is treated as: (i) General workload: charged to factory overhead and spread over production. (ii) Specific urgent job: charged directly to that job because it was incurred to complete that job.

Reasons for difference between cost profit and financial profit can be explained under three headings:

A) Items only in financial accounts (financial-only incomes/expenses)

Income tax, penalties, donations
Interest received/dividend received
Profit/loss on sale of fixed assets
Abnormal losses like loss by fire/flood These affect financial profit but are not included in cost accounts.

B) Items only in cost accounts (notional/imputed costs)

Notional rent for owned premises
Notional interest on capital employed
Imputed salary for proprietor/owner-manager These are included in cost accounts for better decision-making but do not involve cash outflow, so they do not appear in financial books.

C) Items with different treatment/valuation in cost vs financial accounts

Stock/WIP valuation differences due to overhead absorption or standard costing.
Depreciation differences due to different methods/rates.
Over/under absorption of overheads in cost accounts (absorbed vs actual).
Provisions and purely financial adjustments in financial books.

Thus, because the objectives and methods differ, reconciliation is required to relate both profits logically.

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