Question

Briefly explain each of the three costing systems in accounting. job costing, process costing and activity based costing.

Answer 1

Job Costing :
1. As per this Method , Costs will be collected and accumulated according to the Jobs,
	Contracts,Products or the work orders.
2. Each of the job will br treated as the Separate entity for the accounting purpose.
3. It is carried out for the purpose of ascertaining cost of the each job .
4. It takes into account the cost of the Materials,labour and overhead etc.
5. Job Costing is used when the work has been undertaken as per tge Special requirement of the
	Customer.
6. Job Costing is applicable in Printing Press , Hardware, ship building,machine tools,
	Heavy machinery,Interior decorations,repairs and the other similar works.

Process Costing :
1. Process costing is used in the industries where the Material has to pass through two or
	more processes for being converted into a final product.
2. It is used when the cost of the product at each process is to be ascertained.
3. Process Costing is used in the Industries like Chemicals,Textiles,oil refineries,Paper,Sugar
	Paints,Biscuits etc..
4. In Process Costing , a Separate Process A/c should be prepared for each process.
5. The output of the first process will be the Input of the next Process.
Activity Based Costing :
1. It is the method of Assigning Overhead and Indirect costs to products and Services .
2. Activity based costing system of the Costing is based on the activities.
3. This type of the costing is used in the Target Costing , Product costing.
4. It enhances the costing process in three ways :
First it expands the number of costs that can be used,
Second it creates new bases for Assigning the Overhead costs
Finally it alters the Nature of the Several Indirect costs.