The terms ‘Costing’ and ‘Cost Accounting’ are often used interchangeably. But there is a little difference between the two. Costing simply means cost finding by any process or technique. The Chartered Institute of Management Accountant (CIMA) has defined costing as – “The techniques and processes of ascertaining cost.”

Cost Accounting is a formal system of accounting for costs in the books of accounts by means of which cost of products and services are ascertained and controlled.



According to definition given by CIMA, London “Cost Accounting is the process of accounting for cost from the point at which expenditure is incurred to the establishment of its ultimate relationship with cost centres and cost units”.





This definition is authoritative. In simple words we can say cost accounting is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products or services and the presentation of arranged data for the purpose of control and guidance of management.

Costing, Cost Accounting and Cost Accountancy:

In practice, the terms ‘costing’ and ‘cost accounting’ are used interchangeably. However, costing should not be confused with cost accounting. Costing refers to the technique and process of ascertaining costs. The technique consists of the principles and rules for determining the cost of products and services.

The technique is, however, dynamic and changes with the change of time. The process of costing is the day-to-day routine of ascertaining costs. Cost accounting, on the other hand, is defined as the process of accounting for cost from the point at which expenditure is incurred or committed.



The process continues till the establishment of its ultimate relationship with cost centre or cost unit. It is that specialised branch, of accounting which involves classification, accumulation, allocation, absorption and control of costs. Costing can be carried out by the process of arithmetic, by means of memorandum statements or by the methods of integral accounts.

But cost accounting denotes the formal mechanism by means of which costs are ascertained and data are provided for various purposes of management. Cost accountancy is a wide term which includes several subjects such as costing, cost accounting, cost control, budgetary control and cost audit.

The Chartered Institute of Management Accountants, London, defines cost accountancy as “the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control. It includes the presentation of information derived therefrom for the purposes of managerial decision-making.”

Here, science includes the body of systematic knowledge a cost accountant should possess for proper discharge of his responsibilities. Art includes the ability and skill with which a cost accountant applies his cost accountancy background and knowledge to the problems of cost ascertainment, cost control and ascertainment of profitability.