The Limitation of Cost Accounting.
Cost accounting is not free from limitations. The main limitations of cost accounting are as follows;
Image Source: desertsojourn.com/wp-content/uploads/2015/06/Limitations.jpg
- Not an exact science: Cost accounting has developed because of the limitations of financial accounting. Many theories have also been developed in the light of convention and basic principles. These are not static but changing with the time and circumstances. Hence, it is not an exact science but a approximate science.
- No Uniform Procedures and methods: The procedures and methods of cost accounting followed by different organisations are not uniform and therefore, they provide different results from the same information.
- Based on estimation and conventions: In cost accounting some elements of costs like indirect costs are charged on the basis of estimations. These are the actual cost and differs from the estimates. Thus the result derived from cost accounting becomes misleading.