Essentials of a good Cost accounting system

26/07/2021 2 By indiafreenotes
  • Management should have a faith in the Costing System and should also provide a helping hand for its development and success.
  • The system of costing should not sacrifice the utility by introducing meticulous and unnecessary details.
  • Necessary cooperation and participation of executives from various departments of the concern is essential for developing a good system of Cost Accounting.
  • The Costing System must take care of the importance of comparability of data, with previous period’s data, with competitors’ data, with industry averages.
  • The costing system should fix-up the duties and responsibilities of Costing Department staff and the cooperation that can be sought from other functions/departments.
  • Cost Accounting System should be tailor-made, practical, simple and capable of meeting the requirements of a business concern.
  • The Costing System should concentrate more on ascertaining the significant variables of the manufacturing unit which are amenable to control and affect the concern. For example, wages are amenable for control whereas marketing cost is situation oriented.
  • A carefully phased programme should be prepared by using network analysis for the introduction of the system.
  • Before a Costing System is devised and adopted, thorough study should be conducted on production process, methods of work, wage system, input requirements, information needs, financial accounting system etc.
  • The Cost of installing and operating the system should justify the results.
  • Wherever possible, concepts like Management by exception, Responsibility accounting etc. should be adopted into the Costing System.
  • The data to be used by the Cost Accounting System should be accurate; otherwise it may distort the output of the system.