Following are the principles that are followed in process costing in order to ascertain the cost: 

(a) All the production activities are classified by processes and each process or department includes a number of operations which are not separately measurable. 

(b) All the direct and indirect costs that relate to a particular process are debited to that process account. 

(c) The cost per unit is computed by dividing the total process cost by the number of units produced in that particular process. 

(d) The operations are in a sequence which is specific and predetermined. 

(e) In case certain products remain in process at the end of the period, their stage of completion is assessed and the inventory is calculated in terms of completed units. 

(f) If there is some loss in process which cannot be avoided, then the cost of such loss is borne by the units produced in that department. This leads to an increase in cost per unit. 

(g) The processing of raw materials leads to the production of several products from the same raw material and such products may be joint products or byproducts.