LIMITATIONS OF COST ACCOUNTING
Like other branches of accounting, cost accounting is also having certain limitations. The limitations of cost accounting are as follows:
1. Expensive: It is expensive because analysis, allocation and absorption of overheads require considerable amount of additional work, and hence additional money.
2. Requirement of Reconciliation: The results shown by cost accounts differ from those shown by financial accounts.Thus Preparation of reconciliation statements is necessary to verify their accuracy.
3. Duplication of Work: It involves duplication of work as organization has to maintain two sets of accounts i.e. Financial Account and Cost Account.
4. Inefficiency: Costing system itself does not control costs but its usage does.
No comments:
Post a Comment