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Chapter-1

Introduction to Cost and Management


Accounting
Accounting

Accounting is a very old science which aims at keeping records of


various transactions. The accounting is considered to be essential for
keeping records of all receipts and payments as well as that of the
income and expenditures.

Accounting is the process of identifying, measuring and


communicating economic information to permit informed
judgments and decisions by users of the information. (American
Accounting Association).

Accounting is the process of collecting, recording, classifying,


summarizing, and interpreting business transactions.

Accounting can defined as the Language of business. (Robert


Anthony).

Accounting is the Practice and body of knowledge concerned


primarily with
Methods for recording transactions,
Keeping financial records,
Performing internal audits
Reporting and analyzing financial information to the
management, and
Advising on taxation matters. (Business Dictionary)

ACCOUNTING CAN BE BROADLY DIVIDED INTO THREE


CATEGORIES.

Financial Accounting, aims at finding out profit or losses of an


accounting year as well as the assets and liabilities position, by
recording various transactions in a systematic manner.
Financial accounting is mainly concerned with recording , classifying
and summarizing financial transactions with a view to prepare
financial statements .
The main task of financial accounting is to prepare
1. Income statement
2. Balance sheet

Cost Accounting helps the business to ascertain the cost of


production/services offered by the organization and also provides
valuable information for taking various decisions and also for cost
control and cost reduction.

Management Accounting helps the management to conduct the


business in a more efficient manner. The scope of management
accounting is broader than that of cost accounting. In other words, it
can be said that the management accounting can be considered as
an extension of cost accounting. Management Accounting utilizes the
principles and practices of financial accounting and cost accounting in
addition to other modern management techniques for efficient
operation of a company. The main thrust in management accounting
is towards determining policy and formulating plans to achieve
desired objectives of management. Management Accounting makes
corporate planning and strategies effective and meaningful