Quick Learning- Cost Accounting

Introduction to Cost Accounting or Management Accounting, Why study in Cost Accounting is in trend

2 min Learning

Cost Accounting Introduction

In today’s dynamic world, there are multiple branches of Accounting that are attracting students and business entrepreneurs.
Cost Accounting (often known as Management Accounting) is the one that is gaining significant attention. A lot of job opportunities are available in the Finance & Accounting Industry. In Cost and Management Accounting, the accountant measures analyze, and reports financial and non-financial information that helps managers make decisions to achieve the overall objective of the organization. It normally focuses on internal development through internal reporting.

Why study Cost Accounting: There are good number of reasons why Cost Accounting should be employed or studied, few are briefly described below.

  • Increased use of Cost Accounting concepts and practices in
    – Planning and controlling
    – Costing and Pricing of Products and Services
    – Making better decisions around critical business strategies and for decision making
    – Budget and Variances provide managers feedback about the impact/effects of their strategies.
  • Earlier, the Cost accounting branch was primarily considered as a  ‘Data provider’ only, but in today’s world, it has gained enormous significance and has been recognized as an important member in teams responsible for decision making.
  • Cost Accounting has been recognized as an important managerial tool for business strategy and implementation.
  • Besides, in India, for certain companies engaged in the business of specified products and services, maintenance of Cost Records is mandatory (subject to threshold limits) as per The Companies (Cost Records and Audit) Rules, 2014.

Aspirants willing to join into the studies of Cost Accounting (or Management Accounting) must note that a good professional Cost Accountant needs to have the following qualities-

~ Excellent analytical skills,

~ IT/Technology usage skills

~ Cross-functional knowledge and skills to work as business partner of managers.

~ Leadership and Motivating skills for effective change management, help people adapt innovations.

~ Strong sense of integrity to do the right thing only.

~ Good communication skills.

Guidelines/Basic Approach under Cost Accounting-

1. For best resource allocation decisions– Cost-Benefit approach should be considered.

2. Behavioral and Technical Considerations – Lean management to help individuals do their jobs in a better way – more value-added value jobs. Make efficient use of Technology or IT systems wherever the opportunity exists in favor of cost reduction and value creation.

3. One size doesn’t fit all notion – Cost treatments for management accounting purposes can be different from financial accounting purposes due to specified reporting standards (GAAP or IFRS).

Professional Certifications in the field of Cost and Management Accounting:

Aspirants/Candidates who aims to pursue Cost & Management Accounting studies in India are normally advised to join into the course conducted by The Institute of Cost Accountants of India (ICAI).

While Indian professional Cost and Management Accountants have good recognition even in foreign industries, there are ample of overseas opportunities available in the field of Cost Accounting. One can study Cost Accounting and take professional certifications from USA. The Certified Public Accountant (CPA) Examination. the Certified Management Accountant (CMA) examination or Certified Financial Manager (CFM) examination. The CMA and CFM designations are offered by the Institute of Management Accountants (IMA) which is also the largest association of management accountants in the world. Similarly Chartered Institute of Management Accountants (CIMA) is the largest professional management accounting body in the United Kingdom (UK).

ICAI, IMA, AICPA, CIMA are working with an objective to enhance the development of the cost and management accounting profession.

Watch out for our next Blog on Cost Accounting for:

  1. Benefits/Advantages of Cost Accounting.
  2. Cost Accounting Standards
  3. Cost Accounting Objectives
  4. Cost Accounting Concepts
  5. Cost Accounting MCQ with answers
  6. Cost accounting vs financial accounting
  7. Cost accounting Jobs
  8. Cost accounting techniques
  9. Cost-Volume-Profit Analysis (CVP Analysis)
  10. Cost Variances
  11. Professional Certifications in Cost and Management Accounting.
  12. Cost of capital (RRR- Required Rate of Return).

Also read:

CMA Syllabus 2022