What Are The Disadvantages Of Cost Accounting?


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SidrA Tasneem Profile
SidrA Tasneem answered
These are following disadvantages of cost accounting.
Accountants cannot estimate price of assets at current values.
Only covers cost of business does not overcome overall profitability.
Manipulations in accounts still exist.
Standards of accounting vary from business to business.
Colin Russell Profile
Colin Russell answered
Do you mean cost accounting or current cost accounting? There is a significant difference. I am a cost accountant and am involved in setting the costings, profit levels, forecasting etc within the business. There are no disadvantages to it only benefits for the control of the business.
Current cost accounting is a system for reporting company results which accounts for movement in costs due external influences such as inflation. Problems lie in its spurious accuracy in estimating current values. It is very time consuming and much more difficult than accruals accounting. If you have ever tried to do modified historic cost depreciation on a large asset register (I have) you will understand how difficult it is and the limited benefits gained from the additional effort. As far as I am aware, in the UK, only the civil service is using it, need I say more? Industry realised long ago what a waste it is.

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