Subject :Financial and Cost Accounting

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Name :LeemaNoori                                                                                                            Marks : 80

Course :Bachelors in Management Studies (BMS)

Subject :Financial and Cost Accounting

Answer the following question.

Question.1. State the objectives of cost accounting briefly explain the advantages of cost accounting. (10 marks)

Answer:Cost accounting is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products or services, and for the presentation of suitably arranged data for purposes of control and guidance of management. It includes the ascertainment of the cost of every order, job, contract, process, service or unit as may be appropriate. It deals with the cost of production, selling and distribution.

Question.2. Define “Costing”, “Cost” and “Cost Accountancy”. Distinguish between cost accounting and financial accounting. (10 marks)

Answer:Cost, costing, cost accounting and cost accountancy are normally used interchangeably but they are not synonyms of each other. The meaning of these terms is related and similar but there are differences. Cost is a sacrificed resource to obtain something, costing is a process of determining costs, cost accounting is a technique to assist management in establishing various budgets, standards, etc and cost accountancy is the practice

Question.3. What one the limitations of financial accounting? How do you overcome item in cost accounting? (10 marks)

Answer:Net effect of transactions are recorded in financial accounting which has happened in past. These accounts is just postmortem of all events of business in past .These record does not help for future planning and other managerial decisions. Financial accounting shows the profitability of business but it is failure to tell that is it good or bad. Financial accounting is also failure to know the reasons of low profitability position.

2. Financial accounting deals with overall profitability:

Question.5. What are the objectives of cost accounting and what is the relation with Management accounting department? (10 marks)

Answer:Cost accounting is distinct and separate from general financial accounting, which is regulated by generally accepted accounting principles (GAAP) and is responsible for creating financial statements. Instead, cost accounting aims to report, analyze and lead to the improvement of inter-business cost control and efficiency. Cost accounting is a system of operational analysis for management.

The Scope and Nature of Cost Accounting

Question.6. Explain the significance of cost accounting in a manufacturing company. (10 marks)

Answer:Manufacturing cost accounting encompasses several tasks that impact production operations and the valuation of inventory. These activities can significantly boost the profits of a business, as well as bring it into compliance with the applicable accounting standards. The following are all elements of manufacturing cost accounting:

·      Inventory valuation. This is the fully loaded cost of inventory at the end of an accounting period, which is required under various

·       

Question.7. Explain the importance of the Marginal cost technique in managerial decision making? (10 marks)

Answer:Marginal costing is very helpful in managerial decision making. Management's production and cost and sales decisions may be easily affected from marginal costing. That is the reason, it is the part of cost control method of costing accounting. Before explaining the application of marginal costing in managerial decision making, we are providing little introduction to those who are new for understanding this important concept.

Question.8. Explain the term Convention of materiality. (10 marks)

Answer:The materiality concept is the principle in accounting that trivial matters are to be disregarded, and all important matters are to be disclosed. Items that are large enough to matter are material items.

United States GAAP, for instance, states that items are material if "they could ... influence the economic decisions of [financial statement] users...." In other words, materiality errors can mislead decision makers.

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