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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers

Which of the following best distinguishes 'costing' from 'cost accounting'?

Costing is the technique and process of ascertaining cost, while cost accounting is the wider formal system of recording, classifying, allocating, summarising and reporting costs. The distinctions based on selling versus factory costs, compulsion, or past versus future are not valid differences between the two terms.

  1. ACosting is the technique and process of ascertaining cost, whereas cost accounting covers the formal recording, classifying and reporting of costsCorrect
  2. BCosting deals only with selling costs, whereas cost accounting deals only with factory costs
  3. CCosting is statutory and compulsory for all firms, whereas cost accounting is voluntary
  4. DCosting relates only to past costs, whereas cost accounting relates only to future costs

Explanation

Costing refers to techniques and processes of ascertaining costs. Cost accounting is wider, covering the recording, classification, allocation, summarisation and reporting of costs. The other options invent splits by function, legal status or time that do not exist.

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