5. The need of cost accounting arises owing:
(A) To overcome the limitation of Final Accounts
(B) To ensure optimum utilisation of resources
(C) To achieve overall efficiency of business
(D) All of these
Answers
Answer:
(A) To overcome the limitation of Final Accounts
Explanation:
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Answer:
The correct option for this question is option (D) All of these.
Explanation:
To overcome the limitation of Final Accounts:
Management receives outdated information from financial accounting. However, as prior data does not serve any function for management, it is only interested in present data. Because of this, it has been correctly noted that financial accounting only offers a post-mortem review of past events.
To ensure optimum utilisation of resources:
The resources that are accessible in the business sector nowadays are relatively limited. Each business unit must therefore work hard to produce the most possible given the input. The value of input is compared to the value of output to ensure the best possible use of finite resources. This entails balancing the cost of manufacturing per unit against the worth of the final product or the selling price. But the information pertaining to cost per unit of production is not provided by financial accounting. Cost accounting was therefore deemed to be necessary.
To achieve overall efficiency of business:
Every entrepreneur will work tirelessly to expand his company. in order to create effective policy and wise decisions. Management has access to a helpful instrument in this regard: cost accounting. Analysis of each unit's cost of production enables management to identify issues.
Thus, a new accounting system that could offer internal reports to management was therefore envisioned because financial accounting to some part fails to provide the necessary cost data to management.