Principles Of Accounting I Com Part 1 By Sohail Afzal Pdf 11

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Principles Of Accounting I Com Part 1 By Sohail Afzal Pdf 11
Nov 24, 2020
Mar 4, 2020
Costs: In General Theory, Production Costs or Running Cost is defined as direct or indirect expenditure of money or other assets. The cost is incurred by the producer of a product for the purpose of providing the total services necessary to produce or to market the product. It differs from price which is generally the amount that the customer pays for the product. Costs incurred are usually considered as expenses which are deducted from the initial price. The difference between the costs and the price is the net profit for the producer.
Classification of cost There are direct cost and indirect cost. Direct Cost is an expenditure made to obtain the same or similar material, goods, or services. Direct costs have one sole owner, namely, the person who spent the money. If they are given by the customer, they are not considered as a cost. Examples of direct costs:
1. In a contract between a seller and a buyer, selling price is the direct cost of the product.
2. In a contract between two buyers, buyer’s cost is the direct cost of the product.
3. In a contract between an employer and an employee, salary is the direct cost of the employee.
4. In the store of a company, all are considered as direct cost.
Indirect Cost is an expenditure incurred to purchase other goods, services, or facilities. The customer is not the one who purchases or purchases the facility. Examples:
1. An office rent is indirect cost.
2. A tax is indirect cost.
3. Labor costs is indirect cost.
4. Repairs are indirect cost.
Different methods to classify costs It is usually assumed that costs can be classified as direct or indirect. This classification is based on who is required to pay the cost. In this case, the two main costs are fixed and variable cost. Fixed cost is the cost which is required irrespective of the quantity of the product. Examples of fixed cost:
1. Stock
2. Office rent
3. Manufacture
4. Repairs
5. Taxes.
Variable Cost is the cost which varies with the quantity of a product and its price. Examples:
1. Commodity
2. Services
3. Labor
4. Plant and machinery
5. Transportation.
6. Production costs
Consequences of not classifying the costs as they are. https://aurespectdesoi.be/wp-content/uploads/2022/06/DCopy.pdf

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