One of the universally accepted fact is, money has time value, i.e. one rupee has higher value today, than one year later. Time value of money is helpful in determining the value of financial assets. There are two techniques used in this context, i.e. annuity and perpetuity. Annuity, may be defined as the a series of cash flows, usually of fixed amount, paid/received at regular intervals. The interval can be annually, semi-annually or tri-monthly, monthy etc. Perpetuity, on the other hand, is … [Read more...]

The material is an integral part of the production cost, as it is composed of 80% of the total product cost. So every manufacturing concern keeps a track of its inventory purchased, returned and issued during the year, through the inventory record system. The inventory system is of two types: Perpetual Inventory System, in which the movement of the stock is recorded continuously and Periodic Inventory System, which updates the inventory records from time to time only after the physical count of … [Read more...]

Both Standard Costing and Budgetary Control are based on the principle that costs can be controlled along certain lines of supervision and responsibility, that focuses on controlling cost by comparing actual performance with the predefined parameter. However, the two systems are neither similar nor interdependent. Standard Costing delineates the variances between actual cost and the standard cost, along with the reasons. On the contrary, Budgetary Control, as the name suggest, refers to the … [Read more...]

The budget can be understood as a quantitative plan that acts as an estimate of future operation. Based on the Capacity, there are two types of budgets prepared in cost accounting, namely, fixed budget and flexible budget. Fixed Budget is a budget that remains constant, irrespective of the levels of activity, i.e. the budget is created for a standard volume of production. On the contrary, Flexible Budget can be understood as the budget created for different production levels or capacity … [Read more...]

There are various cost accounting techniques used to measure the cost of the product. When the goods are produced only against special orders, job costing is used by firms. On the other hand, when a product passes through several processes or stages, the output of one process becomes the input of next process, and to determine the cost of each process, process costing method is applied. It is generally used when like units are to be manufactured, that too in a continuous flow. In other words, … [Read more...]