ACC 2232 – Chapter 1 Introduction To Cost Accounting

In this topic, you will learn about cost and the importance of it in determining the pricing of a product or service. It can also be expanded to greater detail for Managerial Accounting where it helps us in decision making. Well it is too early to learn Management Accounting but first you have to prepare a sound foundation to know what is cost accounting is all about.


Anything that involve money to spend on something to get something going…hehe. Or to create something. If you want to go for a movie, there is cost involve. If you want to eat at McDonalds, of course there is also cost. In short, the thing you spent on something whether it is paid or still due to be paid, as long as you have already spent….that is COST!

I always remember there was a saying in one of the book I’ve read… “When you start calculating cost, the cost begins…..”


The word ‘ting’ at the end of the word cost….represents the action. Now I’m going to a little bit of english here, but you have to know this. Costing is a technique and process of finding the right way of ascertaining the cost. Of course, there are a lot of things you have spent on doing something, but not all the things that you spent can be put to the costing of that particular activity. There are certain rules  and principles we have to follow. Like everything you do, there are ways on how to do them.


When the two words merge together, it is now can be defined as ” the process of accounting for cost, which begin with the recording of income and expenditure, on the basis of which they are calculated and ends with the preparation of periodical statements and reports for ascertaining and controlling costs. – CIMA. I’m going a bit formal huh!. Well, that’s the definition of cost accounting.



To cut it short, there is more.

  • Determining product cost and pricing

Know the cost, mark-up a bit and there you have your selling price. Make sure that the selling price should be enough to cover the cost of producing the product and yield satisfactory profits. Or else, the owner will make noise, and ultimately you’ll be fired! Hahaha

  • Planning and control

Planning is always an important process to achieve organizations’ objective. Cost is one of them. Any projects, production even going to war, you have to come out with a plan. Or else, you will ended losing. When you plan, you’ll know how much to produce, what to produce, when to produce, where to produce, therefore you can have an estimate ton the cost of each level of activities. Remember, Plan to Fail don’t Fail to Plan.

Control is also an important criteria in managing the cost. You need to be in control of your cost. It can be assigning responsibility, reviewing the production process, regular maintenance on the machines, measuring the performance and comparing results, taking necessary corrective actions and go back to the drawing board and start planning back. These continuous process will go on and on. Boring right? But this is control. You are the master of your own process.

cost accounting vs management accounting

Discuss the advantages and limitations of cost accounting in class. I want you to explore, read, there are a lot in the web.

Potential marks





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