Why Is Cost Accounting So Important To Students Learning Accountancy In Class 11


You will surely come across the term “cost accountancy” during your 11th Accounts. It’s a specific branch of accounting that includes classification, recording, and allocating current and prospective expenses. In the modern world of commerce, it’s one of the most vital processes required to run a business company. Cost accountancy proves beneficial to the management department of the company as well as its workers.

Cost Accounting
Several things make cost accountancy important to students who took 11th Accounts. The first one includes the classification of costs. The word “cost” is generic. The only way to make it useful is to classify it further. Cost accountancy is about recording and classifying such expenses. A few of those classifications include prime cost, direct cost, selling cost, factory cost, etc. Classification of costs lets the management control the same and determine the profitability of the processes and activities.

Price determination
According to the teachers of 11th Accounts, cost accountancy establishes the fundamental differences between fixed and variable costs. Then, the management uses the same to affix the prices of products based on the expenses incurred in producing it. It allows the management department to ascertain the most ideal price for a product or service. It shouldn’t be too high or too low.

Cost control
Cost control is another term associated with cost accountancy that you will learn during 11th Accounts lecture sessions. Efficient business companies focus on controlling the expenses incurred through labour, inventory, and overhead costs. Cost accountancy allows these firms to do so. For instance, a business organization can adopt the EOQ technique to achieve maximum efficiency for inventory management.

Setting standards
Finally, organizations and enterprises utilize standards to come up with estimates and budgets for the future. They use the data to measure the actual efficiency of the process or the department. Cost accountancy comes with an entire branch called “standard costing” that dedicates itself to this particular process.

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