Limitations / Disadvantages of cost accounting
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Answer:
Advantages and Disadvantages of Cost Accounting · 1 . Elimination of Wastes, Losses and Inefficiencies · 2. Cost Reduction · 3. Identify the reasons for Profit or Loss ...
Limitations Of Cost Accounting:
1. Lack Of Fixed Principles
Generally, cost accounting system is practiced on presumed notions. It does not follow fixed accounting principles. So, there is a lack of uniformity in this system.
2. Costly System
This is another major drawback of cost accounting. There is a need of highly skilled and qualified manpower and resources to maintain cost accounting system in the organization. A lot of clerical works and various procedure make cost accounting more expensive.
3. Complex System
It is very complicated system of accounting. It requires various formulas to record cost related data. It needs specific knowledge to prepare different reports. Due to numerous steps and rules, it is considered as complex system of accounting.
4. Not Suitable For Small Business
Small business firms with less number of production or transactions do not prefer cost accounting because of higher cost and complexity.