If so, the following advantages may be available to an organization.A good cost accounting system eliminates wastes, losses and inefficiencies by fixing standard for everything.New and improved methods of production are followed under cost accounting system. 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. This helps in proper planning of work so that no section is overworked and no section remains idle. It leads to over absorption or under absorption of 6. The extent of advantages derived from the cost accounting is based on the type, adequacy and efficiency of cost accounting system installation. It is a mistake on the part of any management to believe that mere increase in sales volume will result in profits; increased sales at prices lower than the cost may well lead the concern to the bankrupt court. It will certainly check recklessness. It was only after the order was obtained that the firm found that, by mistake, the price of materials was not included in the quotation. More reasonable and easier inventory measurements. (f) The exact result of all expenditure is brought to the notice of the management by Cost Accounting in a manner which Financial Accounting fail to achieve.

Cost Accounting is a tool used by the management of the company that helps in identifying, recording and assessing an entity’s cost of production in order to measure the performance of various products and divisions, thus aiding in decision making.Cost accounting helps ensure better monitoring of the consumption of resources by various cost centers and ensures better departmental control.A good cost accounting system helps management decrease the entity’s production cost by employing cost control and cost reduction.A comparison of costs across periods in respect of the same product or with competitors or industry standards helps to determine avenues for cost control and reduction.Cost accounting systems help identify redundant activities, inefficiencies, abnormal and avoidable losses.

This will be done only if the cost of each product or each job is ascertained and compared with the price obtained. This problem can also be solved only if proper information about costs is available. Cost Accounts will also reveal profitable and unprofitable activities and will indicate in what directions production may be usually expanded or contracted. In any case it is this sort of comparison which tells management about the going up or coming down of efficiency. On the basis of such appraisal the management can encourage the concerned people with suitable rewards and incentives. It will throw light upon those activities which bring profits and those activities which result in losses.

(i) Helps in controlling cost – Cost accounting is very helpful in controlling expenditure and minimizing the manufacture cost of products. (viii) Identifies normal/abnormal losses and gains – Cost accounting entails identifying normal and abnormal losses and gains. (x) Helps in the performance appraisal – Cost accounting data help the management in appraising the performance of various units and managers. For example, a concern may suffer not because the cost of production is high or prices are low but because the output is much below the capacity of the concern. (xi) Useful for planning various activities – Cost accounting data are very useful for the management for planning various activities. (ix) Basis for the system of standard costing and budgetary control – Cost accounting lays the basis for the system of standard costing and budgetary control. Measurement and Improvement of Efficiency: The chief advantage to be gained is that Cost Accounting will enable a concern to, first of all, measure its efficiency and then to maintain and improve it. In such a case, price cannot be properly fixed if no proper figures of cost are available. The cost is ascertained on the basis of full utilization of capacity. (xiv) Useful in day-to-day affairs – The cost department functions as a service department and provides useful and relevant information to various line managers such as a sales manager, production manager, etc., which immensely helps them in their day-to-day affairs.Before uploading and sharing your knowledge on this site, please read the following pages:Read Accounting Notes, Procedures, Problems and Solutions This helps the organization in cost controlling and making strategic planning and decision on improving cost efficiency. (e) The location of weakness stimulates the new and improved processes. Say for example the cost of producing one unit increased from Rs.100/- to Rs.

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