Impact of Cost Accounting
IMPACT OF COST ACCOUNTING ON FINANCIAL DECISION
INTRODUCTION
In the modern business world, the nature and functioning of business organizations have become very complicated. They have to serve the needs of variety of parties who are interested in the functioning of the business. These parties constitute the owners, creditors, employees, government agencies, tax authorities, prospective investors, and last but not the least the management of the business. The business has to serve the needs of these different category of people by way of supplying various information from time to time. In order to satisfy the needs of all these group of people a sound organisation of accounting system is very essential.
In the ancient days the information required by those who were interested with a business organisation was met by practising a system of accounting known as financial accounting system. Financial accounting is mainly concerned with preparation of two important statements, viz., income statement (or profit & loss account) and positional statement (or
Balance Sheet). This information served the needs of all those who are not directly associated with management of business. Thus financial accounts are concerned with external reporting as it provides information to external authorities. But management of every business organisation is interested to know much more than the usual information supplied to outsiders.
In order to carry out its functions of planning, decision-making and control, it requires additional cost data. The financial accounts to some extent fails to provide required cost data to management and hence a new system of accounting which could provide internal report to management was conceived of.
DEFINITION OF COST ACCOUNTANCY
The terminology of cost accountancy published by the Institute of Cost and Management
Accountants, London defines cost accountancy as “the application of costing and cost accounting principles, methods
INTRODUCTION
In the modern business world, the nature and functioning of business organizations have become very complicated. They have to serve the needs of variety of parties who are interested in the functioning of the business. These parties constitute the owners, creditors, employees, government agencies, tax authorities, prospective investors, and last but not the least the management of the business. The business has to serve the needs of these different category of people by way of supplying various information from time to time. In order to satisfy the needs of all these group of people a sound organisation of accounting system is very essential.
In the ancient days the information required by those who were interested with a business organisation was met by practising a system of accounting known as financial accounting system. Financial accounting is mainly concerned with preparation of two important statements, viz., income statement (or profit & loss account) and positional statement (or
Balance Sheet). This information served the needs of all those who are not directly associated with management of business. Thus financial accounts are concerned with external reporting as it provides information to external authorities. But management of every business organisation is interested to know much more than the usual information supplied to outsiders.
In order to carry out its functions of planning, decision-making and control, it requires additional cost data. The financial accounts to some extent fails to provide required cost data to management and hence a new system of accounting which could provide internal report to management was conceived of.
DEFINITION OF COST ACCOUNTANCY
The terminology of cost accountancy published by the Institute of Cost and Management
Accountants, London defines cost accountancy as “the application of costing and cost accounting principles, methods