Continuing with the existing machinery or replacing them byimproved and economical machines.
To Provide reliable cost data
: To main objects of cost accounting is toprovide reliable data for controlling business activities and forascertaining cost of production.
Essentials of a good Cost Accounting System:
The Cost Accounting System should be tailor made, practical, simple andcapable of meeting the requirements of a business concern.ii.
The method of costing should be suitable to the industry and serve itsobjectives.iii.
The Costing System should receive co-operation and participation of executives from various departments.iv.
The cost of installing and operating the system should justify the results.v.
The system of costing should not sacrifice the utility by introducingmeticulous and unnecessary details.vi.
The system should consider the organisational structure of the businessand it should be designed as a sub-system of the overall organisation.vii.
There should be a harmonious relationship between costing system andfinancial accounts. Unnecessary duplication should be avoided. A singleintegrated accounting system would be ideal.
LIMITATIONS OF COST ACCOUNTING:
Like other branches of accounting, cost accounting is not an exact science but is an art which hasdeveloped through theories and accounting practices based on reasoning andcommon sense. These practices are not static but changing with time. Costaccounting lacks a uniform procedure. There is no stereotyped system of costaccounting applicable to all industries. There are widely recognised costconcepts but understood and applied differently by different industries. Costaccounting can be used only by big enterprises. The limitations of costaccounting are as follows:i.
It is expensive because analysis, allocation and absorption of overheadsrequire considerable amount of additional work.ii.
The results shown by cost accounts differ from those shown by financialaccounts. Preparation of reconciliation statements frequently is necessaryto verify their accuracy. This leads to unnecessary increase in workload.