Cost- Principles of Accounting
What Does Historical Cost Mean?
A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when it was acquired by the company. The historical-cost method is used for assets in the United States under generally accepted accounting principles (GAAP).
Cost concepts and terms 1. Cost The amount of expenditure (actual or notional) incurred on or attributable to a specified article, product or activity is referred to as cost. 2. Cost object Anything for which a separate measurement of cost is desired is referred to as a Cost Object. Example of cost object includes a product, a service, a project, a customer, a brand category, a department, a program etc. 3. Direct costs Costs that are related to the cost object and can be traced in an economically feasible manner are referred to as Direct Costs. 4. Indirect costs Costs which are relatable to the cost object but cannot be traced in an economically feasible manner are referred to as Indirect Costs. 5. Standard cost A pre-determined cost which is determined form the management’s expected standard of efficiency operation and there relevant necessary expenditure. It may be used as a basis for price fixing and for cost control through variance analysis. 6. Marginal Cost Marginal cost refers to the amount at any given volume of output by which aggregate costs are changed if the volume of output is increased or decreased by one unit. 7. Cost of sales Cost of Sales is the aggregate of the cost which are attributable to the sales made. 8. Cost unit Cost unit refers to a unit of product, service or time or a combination of these in relation to which costs may be ascertained or expressed. Cost units are usually the units of physical measure like number, weight, area, volume, length, time and value. 9. Profit Centre The centres which have the responsibility of generating and maximising
A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when it was acquired by the company. The historical-cost method is used for assets in the United States under generally accepted accounting principles (GAAP).
Cost concepts and terms 1. Cost The amount of expenditure (actual or notional) incurred on or attributable to a specified article, product or activity is referred to as cost. 2. Cost object Anything for which a separate measurement of cost is desired is referred to as a Cost Object. Example of cost object includes a product, a service, a project, a customer, a brand category, a department, a program etc. 3. Direct costs Costs that are related to the cost object and can be traced in an economically feasible manner are referred to as Direct Costs. 4. Indirect costs Costs which are relatable to the cost object but cannot be traced in an economically feasible manner are referred to as Indirect Costs. 5. Standard cost A pre-determined cost which is determined form the management’s expected standard of efficiency operation and there relevant necessary expenditure. It may be used as a basis for price fixing and for cost control through variance analysis. 6. Marginal Cost Marginal cost refers to the amount at any given volume of output by which aggregate costs are changed if the volume of output is increased or decreased by one unit. 7. Cost of sales Cost of Sales is the aggregate of the cost which are attributable to the sales made. 8. Cost unit Cost unit refers to a unit of product, service or time or a combination of these in relation to which costs may be ascertained or expressed. Cost units are usually the units of physical measure like number, weight, area, volume, length, time and value. 9. Profit Centre The centres which have the responsibility of generating and maximising