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Discuss The Limitations Of General Accounting?

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The general accounting will show the total of each cost incurred, and will not reveal the costs which were necessary to manufacture each of the different products or to render each service. It will not show the cost of performing different manufacturing operations. General accounting is historical (data are summarized at the end of the accounting period).Therefore, day to day cost information are not available, thus costs cannot be controlled. As day to day, cost information are not available prices cannot be established for quotations, tenders etc.

The classification of accounts made in general accounting does not give information regarding costs by departments, processes and activities in the manufacturing division: by units of products, customers and sales territories in the sales department; by sections services and functions in the general offices.

The foregoing limitations and inadequacies of general accounting in the supply of information much needed by management and other interested parties have led, during the past fifty years, to the adoption of supplementary accounting methods known as cost accounting. These supplementary accounting methods or cost accounting can furnish whatever information in whatever detail needed by management. The only limitation in the supply of information which the cost accounting can provide is the cost of cost accounting itself.

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