Treatment of opening stock and closing stock Posted by birendra kunwar on 9:49 PM

The stock is valued on the basis of manufacturing cost and production for the period . Under absorption costing , the fixed as well as variable manufacturing cost are included in total cost of production
In absorption costing , three types of stocks have to be valued on the basis of manufacturing cost . They are manufactured stock , opening stock .
The valuation of opening and closing stock depends upon the valuation method applied by the concern . In the case of first-in-first-out (FIFO) method, the beginning stock is valued on the basis of manufacturing cost of the previous period . However, the closing stock should be valued on the basis of production cost of the current period . If the manufacturing cost of the previous period is not given , the cost per unit of opening stock will be equal to the production cost for the current period . Sometimes the closing stock unit may be more than production units. In that case the excess units to production units is valued at the value of opening stock.
In the case of last-in-first-out (LIFO) , the ending stock is valued as same to the beginning stock. If the ending stock is more than the beginning stock, the excess units in beginning stock are valued at production cost of the current period . It should be mentioned in the question for an application of LIFO, otherwise FIFO method of stock valuation should be applied.

Advantages of Variable Costing Posted by birendra kunwar on 6:48 AM

The main advantages of variable costing are :

(1) Variable costing is a simple and easy method . It is less confusing.

(2) Fixed costs are excluded in cost of production and hence it avoids the complication of over or under absorption of fixed manufacturing overhead.

(3) It provides useful data for managerial decision making.

(4) It helps the management in pricing.

(5) It allows for compatibility with standard costing and budgeting.

(6) The clear cut division of costs into fixed and variable cost paves the way for better and efficient cost control .

(7) The profit under variable costing depends upon the sales volume . Profit in variable costing is not affected by changes in inventory as it is in absorption costing. In absorption costing, both sales and production influence profit.

(8) Variable costing is very useful in management reporting.

Characteristics of Variable Costing Posted by birendra kunwar on 6:24 AM

The main characteristics of variable costing are as follows :

(1) All the costs like production , administration, selling and distribution costs are classified into fixed and variable cost.

(2) Variable costs are charged to production cost. Fixed costs are not charged to production costs .Rather, it is charged to contribution margin.

(3) All the fixed costs are taken as periodical cost and it is charged to the profit and loss account of that year when it occurred.

(4) Finished goods and work in progress are valued by taking variable manufacturing cost only.

(5) It has its own method of calculation of profit . The profit is determined by deducting total fixed cost from contribution margin . The contribution margin is ascertained by deducting total variable cost from sales .

Features of operating costing Posted by birendra kunwar on 7:51 PM

The main features of operating costing are as following:

(1) The undertaking which adopts service costing does not produce any tangible goods. These undertakings render unique services to their customers.

(2) The expenses are divided into fixed and variable cost . Such a classification is necessary to ascertain the cost of service and the unit cost of service.

(3) The cost unit may be simple or composite. The examples of simple cost units are cost per unit in electricity supply , cost per litre in water supply, cost per meal in canteen etc. Similarly cost per passenger kilometers in transport cost per patient-day in hospital, cost per room-day in hotel etc. are the examples of composite cost unit.

(4) Total cost are averaged over the total amount of service rendered.

(5) Costs are usually computed period-wise. However,in the case of utilization of vehicles, use of road-rollers etc., the costs are computed orderwise.

(6) Service costing can be used for service performed internally or externally.

(7) documents like the daily log sheet, cost sheet etc. are used for the collection of cost data.

Accounting for joint product Posted by birendra kunwar on 6:32 PM

The joints products cannot be identified as separate products up to a certain stage in manufacturing. This stage is known split-off point. The exact point in a manufacturing process where two or more products can be distinguished is defined as the split-off point.

The cost incurred up to the point of separation is called joint cost. likewise the cost incurred after the split off point is known as separate or subsequent cost .

C.I.M.A. terminology defines joint cost as "the cost of providing two or more products or services whose production could not, for physical reason , be segregated".

In the words of cost management ,joint cost are "Costs to operate joint processes, including the disposal of waste".

In short , joint cost means all costs incurred prior to the point of separation. Joint cost cannot be traced to the particular product. The appointment of joint cost to each of the joint product is the meaning accounting for joint product. The apportionment of joint cost is very important for finding out the total cost of each joint product .

There are various accounting method adopted for the apportionment of joint cost to each product . The following methods are generally used for this purpose:

(1) Unit Method:

Average Unit Cost Method.

Physical Unit Method.

(2) Sales Volume Method .

Market Value at Separation Point.

Market Value after Further Processing.

Reverse Cost Method.

Introduction of Cost-Volume-profit Analysis Posted by birendra kunwar on 8:03 AM

The relationship between cost volume and profit is shown by cost-volume-profit analysis. it is an analytical tool for analyzing the relationship among cost, price, profit, sales and production volume. Mainly there are three element in cost-volume-profit analysis.

It is highly essential for the management to have the complete knowledge about the inter relationship among the cost, volume and profit. for this purpose cost-volume-profit analysis can be regarded as a sophisticated method or analytical tool used in management.

(1) What sales volume is needed to break-even?

(2) What sales volume is necessary to earn a desired net profit?

(3) How will the change in selling price affect the profit position of the company?

(4) How will the change in cost affect profit?

(5) Which product or product mix is profitable?

(6) Which product or operation of a plant should be discontinued?

(7) What will be new break even sales if these certain changes on fixed and variable cost?

Method of Reconciliation Posted by birendra kunwar on 7:16 AM

The reconciliation statement is prepared with an objective of reconciling the profit between cost and financial account. In place of reconciliation statement, memorandum reconciliation account can also be prepared.

For the sake of reconciliation profit shown by one set of account can be taken as a starting point. The profit taken as a starting point has to be adjusted for an ascertainment of profit of another set of book. If the starting profit is found to be more, because of any reason, then the related amount has to be subtracted. Similarly, if the profit, which is assumed as a starting, is less, then the related amount has to be added.

The following steps are involved in reconciling the profit between cost and financial account:

Step 1 : To begin with profit shown by any one set of account - cost or financial account.

Step 2 : To find out the reasons responsible for the disagreement of profit between two sets of

books.

Step 3 : To determine the addition or deduction items. (Due to any reason if the profit taken as

starting point is more, the related amount should be deducted and vice-versa)

Step 4 : To complete the Reconciliation Statement. (If the profit of cost account is taken as

starting point, it will be completed by showing the profit of financial account and vice-

versa.)

Limitations of Standard Costing Posted by birendra kunwar on 6:33 AM

Standard costing has certain limitations which are as follows :

(1) Setting of standard is a very difficult task and it involves a high degree of technical skill. Therefore it is costly and will be expensive from the point of view of small concern.

(2) Conditions of the business are charging. Hence , standard must be revised from time to time otherwise they lose importance.

(3) Fixation of standard is not possible for every type of work or operation. It cannot be implemented in those industries which do not produce any standard product.

(4) Sometimes it creates adverse psychological effects. if the it is set at a high level its non-achievement results in frustration and builds up resistance. It acts as a discouragement rather than incentive for better efficiency.

(5) It is partly determined on the basis of past experience and partly on the basis of forecast of future expenses. Thus uncertainties are around standard and determination of correct standard is very difficult.

(6) Too much care and attention are required to introduce as well as to keep up-to-date the system otherwise the very purpose of the system will be frustrated.

Cash budget in accountancycareers Posted by birendra kunwar on 5:35 AM

The cash budget is a plan of future cash receipt and payment. The statement showing the estimated cash income (cash flow) and cash expenditure (cash outflow) over a projected time period is known as cash budget. A very helpful tool in cash management is the cash budget. It helps management in planning to avoid unnecessary idle cash balance. In the same way, it also helps to eliminate unneeded expensive borrowing. Thus, the cash budget helps a management keep cash balances in reasonable relationship to its needs.

A cash budget serves the following purposes:

(1) It indicates the effect on the cash position of seasonal requirement large inventories unusual receipts and slowness in collecting bills receivable.

(2) It indicates such cash requirement for a plant or equipment expansion programme.

(3) It points to the need for additional funds from external sources such as bank loans issue of securities.

(4) It indicates the availability of cash for taking advantages of discount offered.

(5) It helps in planning redemption of preference shares or redeemable debentures payment of pension etc.

(6) It shows the availability of excess funds for short or long term investments.

A cash budget includes no accrual items. For example income earned or accrued but not received and expenses incurred or outstanding but not paid are not included in cash budget. Only the cash transactions are included in cash budget. The cash transactions for preparing this budget is obtained from various operating budget discussed above. for example, cash sale and collection from customers can be ascertained from sales budget. Monthly cash purchase and cash payment to form labour budget overhead cost from overhead budgets can be ascertained. This method of preparing cash budget is known as receipt and payment method and is a common method of preparation.

The cash budget consists of following four major section sections:

Step 1 Receipt section.

Step 2 Disbursement section.

Step 3 Cash surplus or deficit section.

Step 4 Financing section

accountancycareers use of tally in accounting Posted by birendra kunwar on 8:15 AM

Tally is the only one accounting solution, there is no any accounting code , it has complete accounting business solution, it is the most use and making accountancycareers. In tally it has multi-platform availability, versatility,flexible nature.

If you are going to making accountancycareers you must have to make knowledge about the accounting for the business organisation. Because we can not start any business and get success in business. So if you looking for careers in accountancy, you must have to get knowledge and training how do keep accounting, than you can make your careers in accountancy that is called accountancycareers.

Terms and condition of accountancycareers in tally

1) Current assets

2) current liabilities

3) Fixed assets

4) Direct expenses

5) Indirect expenses

6) Advance and loan

7) Investment

8) Sundry debtors

9) Sundry creditors

10) Goodwill

11) Bad debts

12) Inventory

13) Sales

accountancycareers and job opportunity Posted by birendra kunwar on 1:25 AM

Accountancycareers is the most importance part of our business organization. Every business organization need a accountant for the growing your business volume. There are some acountancycareers software to solve their accounting problems. So we have to need a good accountant for the keeping accounting problem.

There are some accounting software solution to solve their accounting problem in the business organisation . These are as follows,

1) Excel

2) Tally

3) fact

4) Tata Ex

These software are the most important for the business solution . It may useful for every business . If we have some experience and we are qualified to operate these software we can get job easily.

Meaning of Inventory in accounting system Posted by birendra kunwar on 9:45 PM

1) Held for sale in the ordinary course of business.

2) In the process of production for such sale.

3) To be currently consumed in the production of goods or services to be available for sale.

From the above definition it is clear that any stock that a firm keeps to meet its future requirement of production and sales is called inventory . The principal types of inventories are , raw material and supplies, goods in process and finished goods. Raw material represents goods kept by a manufacturing firm prior to their being utilized in the production process . Supplies generally include tools , stores and spares which are consumed in the production of goods and services. Goods in process represent the semi-finished goods. They include those materials that have been committed to production process but have not yet been converted in to finished goods are completed goods awaiting sales.

The nature of inventory depends on the type of activity carried on . In case of manufacturing unit , inventory will generally include all types of inventories mentioned above , which in case of a trading concern, it will comprise only finished goods or stock in trades owned by it for sale to customers in the normal course of business.

Computation Method of Accountancycareers Posted by birendra kunwar on 9:29 PM

The method for computing the cost under activity based costing outlined as follows :

Step 1) To find out the cost traced to activities.

Step 2) To determine the cost drive for each activities.

Step 3) To find out the cost drive rate.

Step 4) To find out cost traced to product.

Traditional costing system is not applying the above given computation method. Both system trace overhead costs to product on the basis of cost centre’s. The differences we find between the two systems are allocation from cost centre to product. Traditional cost system traces overhead cost to products using small number of allocation bases , which vary directly with the volume of product produced . But activity based costing system uses many driver as allocation basis. The activity based costing , cost driver ratio should therefore be more closely related to the causes of overhead costs.

For providing an overview of traditional and activity based costing system, the following chart and example are presented.

Scope of Management Accounting Posted by birendra kunwar on 4:20 AM

The scope of management accounting is very wide and broad based. It includes all information which is provided to the management for financial analysis and interpretation of the business operation . The following fields of activities are included in the scope of this subject.

1) Financial Accounting : Financial accounting provides historical information which is very useful for future planning and financial forecasting. Designing of a proper financial accounting system is a must for obtaining full control and coordination of operation of the business.

2) Cost accounting : It provides various techniques of costing standard costing , differential and time control , budgetary control and variances analysis etc.

3) Internal financial control : Management accounting includes the internal control method like internal audit, efficient office management etc.

4) Interpretation : Management accounting is closely related to the interpretation of financial data to the management and advising them on decision making.

Related Terminologies cost in accountancy Posted by birendra kunwar on 3:49 AM

The total of all expenditures involved in the process of production is known as the cost . The cost covers every aspect of human life and business . Hence it is not a single matter to define cost . The accounting experts, economists and various units have defined cost in different ways . So the meaning of cost has to be understood according to the place and objectives in different forms according to its use.

The technique or process to determine the cost is called costing . It is the Technique of measurement and accumulation of cost of different activities products processes or services. It has been defined by the CIMA as the technique and process of ascertaining cost .

The process and concepts to determine the cost of a product or services is called cost , and it covers the classification, recording and allocation of expenditures involved in the process of production.

The term Cost accountancy is wider to costing and cost accounting in terms of its concept. Cost accountancy covers costing , budgetary control , cost control , and cost audit. Cost accountancy is the study of application of cost accounting principle , process and rule for the determination of cost and its control.

Definitions of cost accounting and managerial problems Posted by birendra kunwar on 3:25 AM

Cost accounting is accounting for cost . It is made of two words-cost and accounting. The terms cost denotes the total of all expenditures involved in the process of production. Thus , it covers the costs involved production and cost involved while receiving it. Accounting on the other hand ,collects and maintains financials record of each income and expenditures and make avail of such information to the concerned officials. Thus cost accounting is a practice and process of cost which determines the profitability of a business concern by controlling the cost with the application of accounting principle, process and rules.

Cost accounting includes the presentation of information derived there from for purposes of managerial decision making . Thus cost accounting is an art as well as science . It is science because it is a body systematic knowledge having certain principles which a cost account should possess for proper discharge his responsibilities . It is an art as it requires the ability and skill with which a cost account is able to apply the principles of cost accounting to various managerial problems . Practices include the continuous effort of a cost account in the field of cost accountancy . Such efforts also include the presentation of information for the purpose of managerial decision making and keeping statistical records.

Control over labour cost in accounting Posted by birendra kunwar on 3:08 AM

Labour cost holds a substantial proportion in the total costs. Labour cost is directly concerned with the human beings. Therefore, it is very difficult to control it. However , many industrial organisations have used various control devices to control this cost . But co-operation and co-ordination among various departments is the key requisites to control this cost.

I n a well managed organisation , various departments are set up for accounting and control over labour cost . They are as follows,

1) Personal department

2) Engineering and work study department

3) Rate or Time and motion study department

4)Time keeping department

5) Payroll department

all these departments are involved , by one-way or another , to control labour costs.

accounting process or cycle Posted by birendra kunwar on 8:45 PM

accounting is a continious process. it is a complete sequences of accounting activities. it stores with the primary entry of transaction in journal and ends with the prepration of final accounts. it includes identifying recording classifying summarizing and communicating financial transaction these business transactions are record in a set of books such as journal, ledger cash book etc. unless these transaction are recorded properly a businessman will not be in a position to know where the business stands.

Double entry system Posted by birendra kunwar on 4:27 AM

 Book keeping is that branch of knowledge which tells us how to keep the records of financial transaction. The need for recording such transaction arises because it is difficult to remember all financial transactions during a period of time. There are two system of recording such financial transactions. (a) single entry book keeping system.

(b) double entry book keeping system
Single entry book keeping system is that system of book keeping under which a complete record of each an every transaction is not kept. Under this systems only one aspect is records both aspect is recorded for most of the transactions. But double entry system is a complete recording system it records both aspect of all transactions.
Double entry system is modern scientific system of recording the financial transactions. this system recognizes that every financial transaction has two aspects of book keeping. in other words ,the system of making two entries for recording a transaction in the book of each contracting party is called double entry system book keeping.

accounting activity Posted by birendra kunwar on 3:58 AM

Accounting is an activity designed to identify measure and communicate financial information about economic entitles to interested persons . it is both an art and a science of keeping records of financial transactions , presenting and analyzing financial information of government and non governmental enterprises . it is an essential component of commerce education.

career in accountancy Posted by birendra kunwar on 3:49 AM

 

accountancy is a main post for every company .there are many job opportunity in accountancy .every business need aaccountant so it is very important post .if you have experiance many company offer for job. if you are a graduate there is  higher probablity to get good  job and earn money . there are many vacancy in chartered accountancy post  but job seekers are few .  so now a days accountancy is the language of business because it is the vehicle for reporting financial information about a business to many different group of people. accounting that concertrate on reporting to people inside the business is called management accounting . it is used to provide information to employees, managers and auditors.a career is mostly seen in course of successive situations that make a persons occupayion.