The advantages of cost account are as follows:
The cost, selling price and profitability of the product is minutely calculated by cost accounting.
The future production plan can be made by using the data provided by the costing department about the costs involved with different processes and activities.
The periodical profit and loss of the product can be determined by the cost accounting.
The exact cause for either decrease or increase in the profit can be determined by cost accounting. The cause may be higher cost of the product, lower selling price or unused capacity.
According to the department, process, unit of production or the services provided the account for the cost of the material and supplies is taught by cost accounting.
A relevant and suitable plan for wages, incentives and rewards for the workers and employees is introduced by cost accounting.
Within and outside the organization reliable comparison of the products and services is facilitated by cost accounting. Cost accounting also facilitates highest efficiency levels of operations with lowest level of product.
Cost accounting helps the government in planning and policy making about import, export, industry and taxation. The excise, service tax and income tax can be accessed by cost accounting. Readymade data is provided to the government in fixing the price, tariff protection etc.
Cost accounting helps in building confidence in the customers and helps in reduction of price due to reduction in the cost.
The cost is classified according to the department, process, product, activity as against financial accounting which provides the consolidated net profit or loss of an organization.
The optimum selling price of the product can be determined by using costing.
Shifting of dead stock items or slow moving items into fast moving items may help company to invest in more proper and profitable inventory. The inventory is maintained at the most optimum level either in terms of investment or a variety of stock.
Being an accurate and adequate valuation technique, cost accounting enables an organization to reliably and exactly value the inventory.
The data provided by cost accounting enables the management in deciding whether in-house production of the product is profitable or not and helps the management avoiding heavy loss due to wrong decisions.
An accurate and most reliable system of accounting is Cost accounting. The results of financial accounting are cross checked by cost accounting by using periodic reconciliation of the cost accounts with th financial accounts.
One of the important tools of costing is budgets and these budgets are prepared by cost accounting. Cost, Revenue, profit, production capacity, efficiency of workers is showcased by Budgets. A check on the misdirection of the activities of the organization is kept by the budget.
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