What is Cost Accountancy?
Cost Accountancy is a term used to mean a profession as well as the course (field of study).
Cost Accountancy - a Profession
Lawyers are engaged in the legal profession, doctors in the medical profession. Similarly cost accountants are engaged in the cost accountancy profession.Cost and Management Accounting, Cost Audit (verification of cost accounting record), are the core areas dealt with by cost accountants. They area also capable of expert level services in the areas of General Management, Personnel Management, Operations Management, Production Management.
Cost Accountancy - a course
Law is a course that candidates pursue to become lawyers. Medicine is a course that aspirants to the medical profession pursue. Similarly, prospective cost accountants pursue the cost accountancy course.The cost Accountancy course is designed and conducted by the body that regulates the profession. The course generally consists of a mix of theoretical study and practical training.
Who is a Cost Accountant?
A Cost Accountant (CWA/ICWA) is a professional accountant by virtue of his/her being a member of the professional body of accountants conducting the cost accountancy course.
Cost Accountants carry on professional practice as Cost Accountants either individually or as a firm (in partnership with other cost accountants). They are mostly found working as employees/consultants in organisations. Some carry on professional practice and work as employees/consultants in organisations part time.
CWA - Designation and Functions performed
Designation for these professionals » CWA/ICWA :: Cost Accountant
Functions performed by Cost Accountants only
The law places certain conditions on the performance of certain functions. Where the law requires that a particular function be performed only by a certain professional, it should be so. Such functions are what we call statutory functions.| 1. | Under Sec 209(i)(d) of the Companies Act 1956 there are over 40 select industries where maintenance of cost accounting records is statutory. Under Sec 233 - B these records are to be got audited by a qualified cost accountant. |
| 2. | A cost Accountant is eligible for certification of Import/Export document under Export Import (EXIM) policy. |
| 3. | A Cost Accountant is eligible for Excise Audit under Sec 14 A and Special Audit regarding CENVAT credit availed under Sec 14AA of the Central Excise Act. |
| 4. | A Cost Accountant is allowed to do special audit under the Customs Act. |
Where the specialised knowledge of the professional would be very much crucial in performing the function, we find that they are performed only by the relevant professionals.
Functions performed by all Professional Accountants
Cost Accounting Field
To have an understanding on what a cost accountant does, we have to understand some relevant aspects which are explained below.
Motive of a business
Profit is the basic motive for any business. Organisations work towards achieving their objectives in an efficient manner. Efficiency in earning profits implies maximising profits with the least possible use of resources.Earning More Profits
Consider a company manufacturing a product at Rs 150 per piece and selling it at Rs 230 per piece. It is making a profit of Rs 80 a piece. It is at present selling 10,000 units and thereby making a profit of Rs 8,00,000.The company is now wanting to earn greater profits. It has set itself a target of Rs. 10,00,000. It has identified that it cannot immediately increase the quantity of sale.
By increasing Sale Price
For achieving its objective the company may increase the selling price to Rs 250 and earn a profit of Rs 100 a piece. The company would be able to earn the targeted profit of Rs. 10,00,000, if it can maintain the quantity of sales at its earlier figure of 10,000.However in this competitive market, there is no guarantee that the sales would not go down if the price is increased. The basic economic principle says demand decreases as price increases.
By increasing the price the company is meddling with factors relating to the external environment which inevitably may have other implications also.
By controlling costs
The company can target achieving the same amount of profit by using an alternative route i.e. cost control.If the company is able to manufacture the same product (at the same or even better quality) at a lesser cost say Rs. 130 a piece, the company would be able to reach the targeted profit figure without having to lose customers as it is only handling the internal factors i.e. factors in its own hands.
If by controlling cost the same product can be manufactured at the same quality or even better quality at Rs 130 a piece, the company would be making a profit of Rs. 100 per piece at the same selling price of Rs. 230 and thereby reach the targeted profit figure of Rs. 10,00,000 by selling the same quantity of 10,000 units as earlier. If it is able to achieve better quality at that price, the quantity of sale may also exceed the present figure, thereby generating profit in excess of the target.
Controlling/reducing costs
This process of controlling/reducing costs involves using the accounting and quantitative techniques to take decisions which would ultimately result in cost reduction.Wastages in raw materials used, labour, less productive manufacturing methodologies etc., will be identified and corrective steps taken to benefit the organization.
Objective with which a cost accountant works
This is what a cost accountant is supposed to do. This will also benefit the society at large by conserving precious resources used in manufacturing..
In such industries as the governments feel appropriate, maintenance of cost accounting records is made mandatory and all such organisations have to get their records certified by a practicing cost accountant.
This is generally done in industries which use precious natural resources whose conservative and efficient use is a requirement for the society as a whole.
Cost Control/Reduction, is not the only function performed by cost accountants.
Becoming a Cost Accountant - Course Structure
- A student pursuing the course after 10 + 2/Senior Secondary/intermediate has to start at the Foundation level.
- A student starting the pursuit after graduation (10 + 2 + 3) can start at the Intermediate Level directly.
Foundation
[6 subjects arranged into4 papers of 100 marks each.]
Intermediate
[9 subjects arranged into two stagesof 3 papers of 100 marks each.]
Computer Tranining
100 Hour computer training.Practical Experience/Training
3 year training (with a company or a Cost Accountant in practice,registered with the institute). Exemption can be obtained
by those having relevant work experience as specified.
Final
[6 subjects arranged into two modulesof 3 papers of 100 marks each.]
Modular Tranining
Grad. ICWAI
Temporary Status till membership is acquired.(This is not a kind of membership)
Associate Membership
Post Qualification Courses
[Optional]Prospects, Special Government Services for Cost Accountants
Employment
Chartered Accountants, on account of their having completed the chartered accountancy course are considered to be candidates with knowledge, ability and intelligence. For this reason, they are the preferred lot for a lot of accounting and managerial jobs.Financial Manager, Finance Director, Financial Controller, Chief Accountant, Cost Controller, Marketing Manager, Chief Internal Auditor, Managing Director etc., are some such jobs where people with professional accounting knowledge are sought after.
With the growing trend of back office operations, many multi national organisations having their back offices in india employ professional accountants.
Private Practice
A qualified professional can set up his/her own private practice as a practicing cost accountant. Apart from the statutory opportunities that would be available to a cost accountant, one can play the role of a consultant for any organisation relating to the functions of accounting, taxation, auditing, cost management etc.However a cost accountant as a consultant would be preferred in areas of costing and management accounting rather than taxation, financial accounting and auditing functions.
Statutory Opportunities
The law places certain conditions on the performance of certain functions. Where the law requires that a particular function be performed only by a certain professional, it should be so. Such functions are what we call statutory functions.| 1. | Under Sec 209(i)(d) of the Companies Act 1956 there are over 40 select industries where maintenance of cost accounting records is statutory. Under Sec 233 - B these records are to be got audited by a qualified cost accountant. |
| 2. | A cost Accountant is eligible for certification of Import/Export document under Export Import (EXIM) policy. |
| 3. | A Cost Accountant is eligible for Excise Audit under Sec 14 A and Special Audit regarding CENVAT credit availed under Sec 14AA of the Central Excise Act. |
| 4. | A Cost Accountant is allowed to do special audit under the Customs Act. |
Where the specialised knowledge of the professional would be very much crucial in performing the function, we find that they are performed only by the relevant professionals.
Special Government Services
Realising the importance of the profession of Cost and Management Accountancy, the central government has constituted an all India cadre known as Indian Cost Accounts Service (ICAS) at par with other Class - I services such as IAS, IFS etc., to advise the government in cost and pricing and in framing the appropriate fiscal and tax policies.As per the decision of the AICTE (All India Council for Technical Education), Fellow members of ICWAI are treated at par with Ph. D candidates in so far as appointment in the post of Professor, Associate Professor, Reader, Assistant Professor and Lecturer in professional/ Management Institutes.
Further Academic Pursuits for Cost Accountants
Courses Conducted by Universities
All the three courses are recognized as equivalent to post graduate qualification in commerce by a number of universities and government bodies.
Bachelor Degree holders who have qualified in these professional courses are eligible for registration as M. Phil and Ph. D candidates in commerce and allied disciplines.
Post Qualification Courses Conducted by Institute ICWAI
The institute conducts the following course for the members of the institute i.e. these courses are post qualification. Only those who have the requisite qualification to become members are eligible for getting admitted to these courses. These are courses which enable you to specialise in areas related to the profession.
1. Management Accountancy Examination — MAC
About the Institute ICWAI - Institute of Cost and Works Accountants of India
Establishment
The Indian institute of Cost and Works Accountant was first established in 1944 as a registered company under the Companies Act with the objects of promoting, regulating and developing the profession of Cost Accountancy. It specializes in the field of Cost and Management Accountancy.The ICWAI came into being by "The Cost and Works Accountants Act" a special act passed by the parliament in 1959 on 28th May 1959.
Management
The Cost and Works Accountancy profession is regulated by a council in accordance with the provisions of "The Cost and Works Accountants Act".The council consists of 12 elected members and 4 nominees of the central Government.