limitations of cost accounting
Answers
Cost Account has certain limitations important among them as follows :-
1) No an exact science :- Like other accounting system , it is not exact scienctific system, but an art that has devoloped through theories and practices.
2) Dependent :- it is not a indipendance accounting. It depends on other accounting system.
3) Expensive :- Cost accouting is expensive. It involvs lot of clarical for maintaning the various records for different purposes.For medium and small size concern, the benefits derived from cost accounting system may not justify the cost involved.
4) Based on estimates :- Indirect costs are not charged fully to a product or process. It is charged to all the products and process on the basis of estimates.
Actual cost varies from estimated cos. Due to these limitatons, all cost accounts results taken as a mere estimates.
These are the limitations of cost accounting...i hope it hepls you
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a)Based on estimates: Indirect costs are not charged fully to a product or process. It is charged to all the products and processes on the basis of estimates. Actual cost varies from estimated cost. Due to these limitations, all cost accounting results are taken as mere estimates.
b)Lack of uniformity: Procedures of cost accounting followed by different organisations are different for different products. There is no uniformity. There is also possibility of difference in pricing material issues for production. All these lead to different cost results for the same operation.
c)Many conventions: There are many conventions for classification of costs, pricing of material issues, apportionment of indirect costs, adoption of marginal or standard cost, etc. These create difficulty in determining the exact cost, because no one type of cost is suitable for all. Purposes and in all circumstances.