Cost Accounting I

Course Code: ACT 323

Credit Hour: 3

Course Group: Specialization Course: Accounting

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Introduction: manufacturing concern – definition – characteristics - manufacturing activity - organization structure - producing departments - service department – chart of accounts – flow of costs – financial statements of manufacturing concerns.

Cost accounting and discipline: definition of objective of cost accounting - limitation of financial accounting - importance of cost accounting – Cost accounting vs. financial accounting – cost accounting vs. management accounting – evolution of cost accounting – relationship of cost accounting with mathematics, economics and statistics.

Cost concept and classification: concept of cost - classification of cost - loss and asset – classification of costs: manufacturing vs. nonmanufacturing costs, basic elements – wise costs, product vs. period costs, costs in relation to the cost object – behavioral classification – functional classification – classification in terms of controllability – classification on the basis of time when computed, classification for decision making – classification on the basis of time when computed – classification for decision making – classification on financial statements.

Accounting for material: a) purchasing and storing materials : need for material control – materials purchase procedures – purchase requisition – purchase order – receiving report – debit/credit memorandum – accounting for materials: recording purchase of materials in materials / stores ledger – recording returns – Recording payment for materials – special purchasing procedures: Bill of material, economic order quantity (EOQ) – just-intime inventory systems. b) issuing materials to production: material requisition – material requisition journal – return of materials to the storeroom – determining the cost of materials issued to production: actual cost methods (FIFO, LIFO, simple average, weighted average, periodic simple average and moving average prices), standard cost, market price and others methods – treatment of discrepancies in material receiving and surplus and deficiencies in stock taking – IAS 2 (revised 1993) – inventories: measurement of inventories (lower of cost and net realizable value), cost of inventories.

Accounting for labor: payroll accounting – direct and indirect labor – labor cost records: Timekeeping – clock cards – time tickets – daily time reports – payroll records: payroll register – shift premiums – overtime premium – payroll deductions – semi – monthly salaried employees.

Accounting for overheads: Introduction to overheads – Accumulation and distribution of factory overhead – applying overhead to production – accounting for non – manufacturing overheads.

Cost sheet/statement of cost of goods manufactured: Definition – unit cost – cost of materials available – cost of materials consumed – prime cost – works cost – total current manufacturing costs – total cost of goods in production – cost of goods manufactured – cost of goods sold – cost of sales – determination of selling price – tender price or quotation or bid.

Integral accounting system: Definition – features – advantages of integration – journal entries – preparation of cost sheet – WIP account – finished goods account – cost of goods sold account – cost of sales account – preparation of financial statements.

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Recommended Books:

Polimeni, Ralph S., Frank J. Fabozzi, and Arthur H. Adelberg, Cost Accounting: concept and application for managerial decision making, (New York: McGraw Hill, Inc)

Prasad, N. K., Principles and Practice of Cost Accounting: Planning and Control (Cincinnati, ohio: South-Western Publishing Co.)

Dansby, Rober L., and Michael D. Lawrence, Cost accounting, latest edition