Part A:

1. Differentiate among Financial Accounting, Cost Accounting & management Accounting.

Answer: Differences Between Financial accounting, management accounting and cost accounting are
bellow:

Financial Accounting Cost Accounting Management Accounting

1) Financial Accounting is an 1) Cost Accounting is an 1) Management accounting

accounting system that
captures the records of
financial information about
the business to show the
correct financial position of
the company at a particular
date.
accounting system, through
which an organization keeps the
track of various costs incurred
in the business in production
activities.
involves preparing and providing
timely financial and statistical
information to business managers
so that they can make day-to-day
and short-term managerial
decisions

2) Financial accounting refers 2) Cost accounting is the branch of
to accounting for revenues, accounting dealing with the
expenses, assets, and recording, classification, allocation,
liabilities. and reporting of current and
prospective costs.
3) Financial Accounting gives out 3) Cost Accounting helps in the
information about the determination of the cost of the
enterprise’s financial activities product, how to control it and in
and situation. making decisions.
4) Persons who make use of 4) It is used by the internal
these financial statements are management of the company and
outsiders like banks, usually the cost accountant
shareholders, creditors, prepares this to ascertain the cost
government authorities etc. of a particular product taking into
account the cost of materials, labor
and different overheads.
5) All the transactions and 5) There is no specific format for the 5) Many decisions are taken based on
statements are recorded and preparation of cost accounting
presented in terms of money statements.
mostly.
6) It makes use of the past or 6) It makes use of both past and
historical data. present data for ascertainment of
product cost.
2) Managerial accounting is the
branch of accounting designed to
provide information to various
management levels in the hospitality
operation for the purpose of
enhancing controls.
3) Unlike the above two accounting,
Management Accounting deals with
both quantitative and qualitative
aspects.
4) There is no question of rules and
regulations to be followed while
preparing these statements but the
management can set their own
principles.
the projected figures of the future.
6) This involves the preparation of
budgets, forecasts to make viable and
valuable future decisions by the
management.
7) Financial statements are
usually presented once in a
year and there is a certain
format for their
presentation.
8) It is mandatory for the
companies to follow the
rules and policies framed
under GAAP (Generally
Accepted Accounting
Principles).
7) No certain periodicity is needed
for the preparation of these
statements and they are needed as
and when required by the
management.
8) This makes use of certain rules
and regulations while computing
the cost of different products in
different industries.
7) Like cost accounting, in
management accounting also there is
no specific time span for its statement
and report preparation.
8) It makes use of both cost and
financial statements as well to analyze
the data.

2. Illustrate the Cost Accounting method & Cost Accounting techniques.

Answer:

I. METHODS OF COST ACCOUNTING

The term 'methods' and 'systems' are used synonymously to indicate an integrated set of
procedures based on a complex concept of ideas, principles and concepts.

For these, costing methods can be grouped into two broad categories:

(1) Job costing and

(2) Process costing.

(1) Job Costing: Job costing is also termed as Specific Order Costing (or) Terminal Costing. In job
costing, costs are collected and accumulated according to jobs, contracts, products or work
orders. Each job is treated as a separate entity for the purpose of costing.

Job costing is further classified into

(a) Contract costing

(b) Cost plus contract and

(c) Batch costing

(a) Contract Costing: This method of costing is applicable where the job work is big like contract
work of building. Under this method, costs are collected according to each contract work.
Contract costing is also termed as Terminal Costing. The principles of job costing are applied in
contract costing.

(b) Cost plus Contract: These contracts provide for the payment by the contracted of the actual
cost of manufacture plus a stipulated profit. The profit to be added to the cost. It may be a fixed
amount or it may be a stipulated percentage of cost.

(c) Batch Costing: In Batch Costing, a lot of similar units which comprise the batch may be used
as a cost unit for ascertainment of cost. Separate Cost Sheet is maintained for each batch by
assigning a batch number. Cost per unit of product is determined by dividing the total cost of a
batch by the number of units of the batch.

(2) Process Costing: This costing method refers to continuous operation or continuous process
costing. Process costing method is applicable where goods or services pass through different
processes to be converted into finished goods.

The following are the important variants of process costing system:

(a) Operation Costing: It is concerned with the determination of the cost of each operation
rather than process.

(b) Operating Costing: Operating costing is also termed as service costing. Operating costing is
similar to process costing and is used in service industries.

(c) Output Costing: Output costing is also called Unit Costing (or) Single Costing. This method of
costing is applicable where a concern undertakes mass and continuous production of single unit
or two or three types of similar products or different grades of the same products.

(d) Multiple Costing: This method of costing means combination of two or more methods of
costing like operation costing and output costing.

II. TECHNIQUES OF COST ACCOUNTING

Costing is the technique and process useful to allocation of expenditure, cost ascertainment
and cost control.

The following are the various techniques of costing:

(a) Uniform Costing

(b) Marginal Costing

(c) Standard Costing

(d) Historical Costing

(e) Absorption Costing

(a) Uniform Costing: Uniform Costing is not a distinct method of costing. The basic idea behind
uniform costing is that the different firms in an industry should adopt a common method of
costing and apply uniformly the same principles and techniques for better cost comparison and
common good.

(b) Marginal Costing: The C. I. M. A. London defines Marginal costing as "a technique of costing
which aims at ascertaining marginal costs, determining the effects of changes in costs, volume,
price etc.

(c) Standard Costing: Standard Costing is a technique of cost accounting which compares the

standard cost of each product or service.

(d) Historical Costing: Historical costing is the ascertainment and recording of actual costs
when, or after, they have been incurred and was one of the first stages in the growth of the
Cost Accountant's work.

(e) Absorption Costing: Absorption Costing is also termed as Full Costing (or) Orthodox Costing.

3. Describe Learning curve theory.

Answer:

The Learning Curve:

Learning Curve Theory is an important concept in business. In General, Learning Curve Theory
or Experience Curve Theory is defined as the following:

A learning curve is a graphical representation of the changing rate of learning (in the average
person) for a given activity or tool. Typically, the increase in retention of information is sharpest
after the initial attempts, and then gradually evens out, meaning that less and less new
information is retained after each repetition.

The learning curve can also represent at a glance the initial difficulty of learning something and,
to an extent, how much there is to learn after initial familiarity. The concept of the Learning
Curve basically states that there is less and less learning as more repetitive steps are taken.
Learning Curve theory argues that it takes less and less effort and time for a thing done in
repitition. For optimal learning to take place, make sure there is interest and motivation in the
thing being learned. Otherwise, learning and performance will be compromised. Learning
Curve theory can be applied to every aspect of business and life — from software, to learning
about your customer’s needs.