The cost is ascertained on the basis of full utilization of capacity. It can also be emphasised that cost figures revealing the true state of affairs of the business may be used in settling industrial disputes. Cost Reduction. Reasonable remuneration is also fixed on the basis of cost accounting information.It is done for facilitating the short-term decisions especially during depression period.Responsibility centers is fixed under cost accounting system. in favour of those shown to be more efficient or economical. If so, correct and reliable data was available from the costing records which are highly useful to the government, share holders, the creditors and the like.The limitations or disadvantages of cost accounting are listed below:1. Financial character expenses are not included for cost calculation. Your options include volume-based costing, the French cost accounting approach, and planned marginal cost accounting.

This check operates through reconciliation of profits shown by Cost Accounts and by Financial Accounts. (c) The centralization of purchasing is facilitated by the use of Cost Accounts and the danger of liabilities exceeding the current financial resources is avoided. Secondly, loss due to carelessness or pilferage or any other mischief will be known and, therefore, put down. It will certainly check recklessness.

Cost accounting will help you measure this.

But with the help of Cost Accounting, Cost Accountant helps in tracking all the expenses and finding out the profitable costs. It also helps in distinguishing between expenditure and loss which is necessary and that which is unnecessary, that is to say, between normal and abnormal losses. Period to period cost comparison also helps cost control.Government can collect reasonable tax from the company and exercise price control.Bonus calculation is very easy to the trade union.

The cost department must cooperate with other departments of the business in offering timely information and helpful suggestions so that their performance may be improved. Elimination of Wastes, Losses and Inefficiencies Sometimes, spare capacity can be used profitably.The total cost of a product is available in the costing records. The actual performance is compared with standard to find the variation.

The management can rightly choose the best out of many alternatives. Each specific system offers advantages and disadvantages to consider, based on the structure of the organization and the number of products which are offered. There is no possibility of shutting down of any product or process or department.On the basis of cost information, the management can decide whether make or buy a product in open market.

The expenses are not permitted beyond the budget amount. Although higher profit goes directly to the benefit of the proprietors, it is indirectly reflected in higher emolument and security of employment of the employees.

The cost is ascertained on the basis of full utilization of capacity.
Accrual accounting is a method used to record transactions when they happen instead of when money exchanges hands. Cost Accountant analyzes all the costs and also the benefits associated from each cost. In case of big contracts, no quotation can be made unless the cost of completing that contract can be ascertained. (e) The location of weakness stimulates the new and improved processes. This information is supplied by the costing records and helps to prepare financial accounts without any further delay.Introducing cost audit can prevent frauds. This problem can also be solved only if proper information about costs is available. Benefits Of Accrual Accounting #1: A Better Picture Of Financial Performance In most medium-large businesses where funds are transferred back and forth on paper more often than cash itself, relying on cash accounting would be a crude, inaccurate way of gauging the financial status and performance of the business. Some of the important questions before management can be solved only with the help of information about costs. This is done by suitable comparisons and analysis of the […] So, today we will talk about the Advantages and Disadvantages of Cost Accounting System in points.So, Let’s start with the advantages of Cost Accounting in points.So, this is about all the advantages of Cost accounting in points.

It has the advantage of being very transparent while recognizing the financial hills and valleys that affect a going business. For a proper system of Costing, it is necessary to have detailed information about the facilities available about machine and labour capacity.

In such a case, price cannot be properly fixed if no proper figures of cost are available.

Period to period cost comparison also helps cost control.Government can collect reasonable tax from the company and exercise price control.Bonus calculation is very easy to the trade union. It leads to cost reduction.A good cost accounting system highlights the reasons for increasing or decreasing profit. It is only Cost Accounting which will reveal this reason for loss.

Reasonable remuneration is also fixed on the basis of cost accounting information.It is done for facilitating the short-term decisions especially during depression period.Responsibility centers is fixed under cost accounting system.

As there are advantages of Cost Accounting, it’s also have the disadvantages too. 120 in 2002. Hence, the calculated cost is not correct always.5. The Advantages of Accrual Accounting . Cost accounting allows for data that enables the firm to measure efficiency.

Banks, lending companies, share and debenture-holders and suppliers of goods granting credit terms can judge the soundness of a company from its cost statistics.
In cost accounting, various budgets are prepared and these budgets are very important tools of costing. It leads to cost reduction.A good cost accounting system highlights the reasons for increasing or decreasing profit. A good system of Cost Accounting affords an independent and most reliable check on the accuracy of financial accounts. This is done by suitable comparisons and analysis of the differences that may be observed.


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