Month: February 2019

Q. 1. What is Standard Costing? What are its features ? Discuss the essentials of an effective standard costing.

Answer: What is standard costing? The efficiency of management, among other things, depends upon the control of costs. For controlling costs management should not only know the actual cost. but also see the variation in pre-determined cost to actual costs. Standard costing is the most effective way of controlling costs. It provides criteria to evaluate and …

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Q.1: Define the term ‘Management Accounting’. Discuss its features and importance.

Answer: Management accounting is the decision-making accounting. It presents data in such a way so as to help management in policy-framing and day to day running of the Organization. Management Accounting refers to accounting for the management i. e. accounting which provides necessary information to the management for discharging its functions. These functions are: planning, organizing. …

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Q. 2. What are the advantages of standard costing ? Discuss its limitations.

Answer Advantages: 1. Measurement of efficiency. Standard costs are compared with actual costs when actual costs are equal or less than standard costs, it may be said that working of the organization is done efficiently and satisfactorily. In case, standard costs are less than actual costs, it will indicate some inefficiency. Thus it helps the …

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Q. 3. What is the scope of management accounting? What are the main differences between management, financial and cost accounting ?

Answer The scope, tools and techniques of management accounting are as under: 1. General Accounting. The general accounting records, external transactions covering cash receipts and payments, liabilities and setting up of sales and receivables. It also covers preparation of regular financial statements which are prepared from various account balances. 2. Cost Accounting. It consists of the application …

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Q.3 How will you differentiate between standard costing and budgetary control?

Answer Difference between Standard costing and Budgetary Control: Although standard costing and budgetary control both techniques are helpful in improving efficiency of employees, determination of this responsibility and controlling in cost of production. Following are the main differences between the standard costing and budgetary control: 1. Scope. Standard costing technique is used only for those …

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Q. 4. What is the difference between standard costing and historical costing?

Cost may be divided into two broad categories – historical cost and predetermined cost. Historical costs are computed after the completion of production of goods, thus the cost figures have value only from a historical point of view. Though the figures obtained at the end of the production process may have a definite value in …

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Q. 2. What are the important functions of Management Accounting? Discuss limitations of management accounting.

Answer: The main functions of Management Accounting are summarised as: 1. Useful in Planning. Management accounting is very useful in planning. Before planning management has to evaluate past and future strategy. The Management Accounting provides past data on the basis of which future line of action can be chosen. 2. Decision-making functions. Before taking up …

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Q. 5 What is the difference between standard and estimated costs

Standard costs and Estimated Costs both are pre-determined costs of any production. Both these costs are calculated in advance before actual production is done and completed. Therefore. sometimes, some people confuse as similar to the standard costs and estimated costs. But actually these are two different costs and having certain differences, these differences are following as: …

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Q. 6. What are the characteristics of Standard Costing?

Answer What are Standard Costs? Standard costs are the predetermined costs of manufacturing a single unit or a number of products, during a specific period in the immediate future, standard costs are planned costs of a product under current or anticipated operating conditions. They are based on normal or ideal conditions or efficiency and volume …

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Q. 7. What are the similarities and differences between budgeting and standard costing?

Answer Similarities between budgeting and standard costing The following are the points of similarity between standard cost and budget cost: Standard Costing Budgeting Cost Predetermined cost Standard costs are predetermined costs fixed according to estimates. Budget costs are also estimated costs. Advance cost Standard costs are estimated in advance, these are compared to actual costs. …

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Process Costing MCQs

Process Costing MCQs quiz is prepared for the students to test their knowledge and clear their concepts. This may also be helpful to prepare objective exam and interviews. Process costing multiple choice question quiz consists of 9 questions with 4 options as the answer. Students need to select the correct option to proceed to the next question. …

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Specific Order Costing MCQs

Take the quick MCQs test to test your knowledge about Specific Order Costing System. This multiple choice questions quiz may helpful for the preparation of objective exams and interviews. Let’s take Specific order costing MCQs quiz below:

Overhead Costing MCQs

MCQs always help students to clear their concepts and test knowledge about a particular subject. Here, We have prepared Overhead Costing MCQs for the students to prepare themselves for objective exams and to appear for an interview. How to take Overhead Costing MCQs quiz? Overhead costing MCQs quiz consists of 12 questions with 4 multiple choice options for …

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Labor Costing MCQs

We have prepared Labor Costing MCQs quiz for the students to get clear their concepts. This quiz may also be helpful for their objective exams and to prepare themselves for job interviews. Labor Costing MCQs quiz consists of 7 questions with 4 options for each question. Students need to choose the correct answer. Below you …

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Material Costing MCQs

Material Costing MCQs test will be helpful for the students to clear their concepts and to prepare themselves for the objective exam. This will also be helpful for individuals who are going to appear in an interview. Material Costing (MCQs) Multiple Choice Questions quiz consists of 14 questions. All questions have 4 multiple choice options from …

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Current Purchasing Power Method (C.P.P.)

Definition Current Purchasing Power Method (C.P.P.) is also known as General Price-Level Accounting. This method is recommended by the Accounting Policy Board and also the Financial Accounting Standards Board (FASB) of USA. This method adjusts historical cost for changes in the general level of prices as measured by the general price-level index. Changes in the general …

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Inflation Accounting

Definition Inflation is that state of affair when money in circulation is more than the production of commodities and services and purchasing power of money comes down and prices of commodities and services increases. Accounting for changing prices (Inflation Accounting) has become synonymous with accounting for inflation due to the unprecedented pressure of inflationary price …

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Human Resource Accounting

Definition The term ‘Human Resource Accounting‘ means accounting for human beings, the most important-organizational resource. The accounting of it deals with the measurement of costs which are associated with recruiting, selecting, hiring, training, placing and developing the employees of an organization. It also involves measuring the present economic value of human resources to an organization. …

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Capital and revenue expenditures multiple choice questions (MCQs)

This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. Each question has 4 answers from which you need to choose the correct one. This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. If you …

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Bank reconciliation statement MCQs quiz

Students can take the bank reconciliation statement multiple-choice questions (MCQs) quiz that we have prepared to test their knowledge about BRS concepts. This quiz may be helpful for the students to prepare them for their objective quiz and interviews. The BRS MCQs Test is consists of 10 Questions, every question has four options as answer …

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Overhead absorption

What is Overhead Absorption? Overhead absorption is defined as the allotment of overhead to cost units. When the amount of overheads has been determined on the pre-determined basis for each cost center, the next step is to charge it to production. This involves taking each cost center and to apply its overheads to all the …

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Departmentalization of Overheads

Definition Departmentalization of overheads refers to the process of determining overhead costs of each department involved in the production. Explanation For the purpose of departmentalization, departments of a factory are divided into two categories i.e., production departments and service departments. Departmentalization of overheads is done in two stages. (a) Allocation of Overheads (b) Apportionment of Overhead …

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Limitations of financial accounting

What is Financial Accounting? Financial accounting, which is historical in nature, is mainly concerned with the recording of day-to-day business transactions. It is simply a post-mortem of the past events. Under financial accounting, business transactions are first recorded in the books of original entry, then classified into ledger and finally summarised by preparing Trial Balance. …

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Cost Accounting Cycle

Cost Accounting Cycle embraces activities connected with verification and preparation of source documents, their journalizing, then posting to control accounts and subsidiary ledgers, closing of accounts and presenting results of operations of accounting period in the form of the income statement. Period Covered By Cost Accounting Cycle Accounting period means the time period covered by an …

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Management Accounting

Definition The application of professional knowledge and skill in the preparation and presentation of accounting information in such a way as to assist management in the formulation of policies and in the planning and control of operations of the undertaking. Explanation Management accounting uses both financial and cost information to advise management in planning and …

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What is cost accounting?

Definition of Cost Accounting Cost accounting is the collection, processing and evaluation of operating data e.g., cost of products, operations, processes, jobs, quantities of materials consumed, labor time used etc. for internal planning and control as well as for external reporting. How does cost accounting help In better control over cost? Cost accounting helps in attaining …

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Standard Costs

Definition Standard costs are those that should be incurred in a particular production process under conditions. It is a predetermined cost of a unit of product, or an operation or department or process. It forms the basis of budgets and sales price determination decisions.

Differential cost

Definition A differential cost is a difference between the costs of alternative courses of action on an item-by-item basis. It assists decision makers while making a choice between different alternatives.

Opportunity Cost

Definition An opportunity cost is a cost that results from a foregone opportunity. Opportunity cost is the concept used for the evaluation of alternative uses of resources. Decision makers select that alternative use of resources from which they expect the maximum net return. Opportunity cost is the net return that could be obtained from the second best …

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What are sunk costs?

Definition Sunk cost is the term used for a cost that has already been incurred and now cannot be avoided or changed and consequently it is irrelevant for the current decision-making situation. Explanation Sunk costs are those costs that have already been incurred. Sunk costs cannot be changed by a decision and hence they are …

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Difference between controllable and uncontrollable costs

All costs are controllable by someone in the organization, so the difference between controllable and uncontrollable costs depends upon a point of reference. Time also plays a part in controllability. Those costs which can be easily made easily and effectively controlled by someone made responsible for the same are called Controllable Costs whereas those which …

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Difference between direct costs and indirect costs

Direct Costs Definition Direct costs are the costs that can be conveniently and economically identified with some cost objectives or can be associated with some particular segments under consideration. Indirect Costs Definition Indirect costs are the costs that cannot be conveniently and economically identified with cost objectives and must be apportioned to the cost objectives …

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