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Limitations of cost Accounting

The following are the main limitations of cost accounting :

(i) It is Expensive. The installation of costing system in the industry requires huge amount of capital. Because, double set of account books has to be maintained. And at the same time it requires the persons who have specialised knowledge in costing. They require higher amount of salary and other benefits.

(ii) Failure of Costing System. Cost accounting system has failed to bring expected results in many cases. Under this background, it is treated as a defective system. However, it is not a faulty system.

(iii) It Ignores a Uniform Procedure. In the practical sense of cost accounting in a particular situation, two competent cost accountants may arrive at different results from the same information. Because of this, we can say, there is no uniform procedure for cost accounting.

 (iv) Matter of Routine Forms and Statements. Sending of costing information to the management requires large number of forms and statements. Simply says, introduction of costing system involves additional and unnecessary paper work.

(v) It is an Unnecessary Application. Cost Accounting is only recently developed and installed in many industries. They have been progressing tremendously. And at the same time, some of the organisations can successfully run without the applications of cost accounting.