Write the meaning of cost accounting and explain any three limitations of cost accounting.

Here's the solution for Question 15:

Question 15: Write the meaning of cost accounting and explain any three limitations of cost accounting.

Cost accounting is a systematic process of recording, classifying, analyzing, and summarizing costs associated with a product, process, or service. Its main objective is to provide detailed cost information to management for planning, controlling, and decision-making.

Here are three limitations of cost accounting:

• Expensive to operate: Implementing and maintaining a cost accounting system can be costly, requiring specialized staff and extensive record-keeping, which might not be feasible for small businesses.
• Lack of uniformity: There is no single, universally accepted method or standard for cost accounting. Different organizations may adopt different techniques, making inter-firm comparisons challenging.
• Based on estimates: Many cost accounting techniques rely on estimates and assumptions, particularly for overhead allocation. These estimates may not always reflect actual costs accurately, leading to potential inaccuracies in cost data.