ADVANTAGES OF COST ACCOUNTING

The short comings of financial accounting are the advantage of the cost accounting. However, the extent of advantages obtained will depend upon the effeiciency with which cost sustem is installed and also the extent to whih the management is prepared to accept the costing system. The principal advantages of cost accounting are :

1. It reveals profitable and unprofitable activities.

2. It helps in cost control by identyfing the sorces of losses, wastages and inefficiences and fixing the responsibilitities for cost control.

3. It enables measurement of efficiency and to maintain and improve efficiency in alla reas of operartions.

4. It helps in decision making. It provides required data management tot ake decisions on various matters. To replace labour with machine or old old machine with anew one etc.

5. It helps inventory control, with the opeeration of perpetual inventory control system in place, helps in eliminating wastages and ineffeciency in purchase of raw materials.

6. It helps in formulation of policies. Cost accounting provides such information which enables the management of formulate production and pricing policies.

7. It guides in fixing selling price under various conditions.

8. It helps in cost reduction by introducing cost reduction programs.

9. It provides information which helps in estimates and preparation tenders.

10.It provides the use of budgets and enables the management to eliminate ineffeciencies.