ESSENTIALS OF A GOOD COST ACCOUNTING SYSTEM

ESSENTIALS OF A GOOD COST ACCOUNTING SYSTEM

The essential features, which a good cost accounting system should possess, are as follows:

(a) Informative and simple: Cost accounting system should be tailor-made, practical, simple and capable of meeting the requirements of a business concern. The system of costing should not sacrifice the utility by introducing meticulous and unnecessary details.

(b) Accurate and authentic: The data to be used by the cost accounting system should be accurate and authenticated; otherwise it may distort the output of the system and a wrong decision may be taken.

(c) Uniformity and consistency: There should be uniformity and consistency in classification, treatment and reporting of cost data and related information. This is required for bench marking and comparability of the results of the system for both horizontal and vertical analysis.

(d) Integrated and inclusive: The cost accounting system should be integrated with other systems like financial accounting, taxation, statistics and operational research etc. to have a complete overview and clarity in results.

(e) Flexible and adaptive: The cost accounting system should be flexible enough to make necessary amendment and modifications in the system to incorporate changes in technological, reporting, regulatory and other requirements.

(f)Trust on the system: Management should have trust on the system and its output. For this, an active role of management is required for the development of such a system that reflect a strong conviction in using information for decision making.