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Cost Accounting

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Fields for Uniformity

There is no system of uniform costing which can be suitable in all circumstances. The degree of uniformity regarding various cost accounting aspects will depend upon the purpose with which uniform costing is introduced. However, uniformity will be required generally about the following matters:

1. Method of costing: Whether job or process or unit costing is to be employed, uniformity should be achieved in this regard.

2. Technique of costing: Whether standard or marginal or absorption costing technique is to be adopted, should be determined in common.

3. Pricing of materials: Materials issued to production are to be priced according to FIFO, LIFO or Average or any/other method, should be standardized.

4. Remunerating labour: Payment of wages will be according to time-rate or piece rate and whether any incentive scheme will be in operation or not. In the event of such a scheme a common plant should be introduced in all the concerns as far as possible.

5. Apportionment overheads: Absorption of factory, office or selling overheads on a common pattern is essential. If one firm is charging factory overhead based on a percentage of direct materials, while other on direct labour, the third on prime cost, it would render comparisons of cost false or useless.

6. Collection and classification of overheads: The overheads are to be collected and classified. The method should be uniform so that confusions are not created.

7. Divisions of costs: Costs are to be divided into different elements. Such division should be common.

8. Classification of accounts: Materials, labour and expenses are to be classified as direct and indirect. The accounting treatment should be similar.

9. Codification of accounts: Common code numbers can be assigned in different firms for similar items. It makes the data accumulation work easier.

10. Items to be excluded: Items to be included in cost accounts and items to be excluded therefrom should be specified in beginning and there should be uniformity in treatment of such items.

11. Cost control: Material, labour and overhead costs are to be controlled. The method of accounting should be common so that control can be exercised on a uniform basis.

12. Presentation of information and reporting: The form of statements and reports should be standardized so that management can compare the results of different organisations.

13. Other matters: Miscellaneous matters, e.g. treatment of by products, provisions for services etc. should be settled. In individual circumstances it may be necessary to consider such aspects.