Page 19 - DCOM202_COST_ACCOUNTING_I

Unit 1: Nature and Scope of Cost Accounting

4. Heavy expenses in installing and maintaining the system: The setting up of a separate Notes
costing department with staff often poses a problem. In addition to installation, the operating
expenses in the form of printing and stationery, heating and lighting, depreciation and
insurance, rent and rates are to be incurred. However, as was mentioned earlier, the system
of cost accounting must be a useful investment, i.e., benefits derived from it must be more
than the investment made on it. If this is not possible, for the time being the system must
be discarded.
5. Lack of trained staff: This was no doubt a problem in olden days. Today this problem
is overcome, thanks to the establishment of the institute of cost and works accountant of
India in our country which offers professional course in costing and also offers training
facilities through various companies to the candidates undergoing the course. In spite
of this facility, it is somewhat difficult to get the competent and experienced staff at the
time of installation. This problem can be overcome by paying attractive salaries to the cost
accountants.
Measures to overcome difficulties:
1. Simplicity: Cost accounting system involves detailed analysis of cost to avoid complications
in the procedure of cost ascertainment an elaborate system of costing should be avoided
and every care must be taken to keep it as simple as possible.
2. Comparability: The records to be maintained must facilitate comparison over a period of
time. The past records must serve as a basis to guide the future.
3. Reconciliation with financial accounts: The system of cost accounts must be capable of
reconciling with financial accounts so as to check accuracy of both the system of accounts
4. Accuracy: The system of cost accounting must provide for accuracy in terms of both cost
ascertainment and presentation. Otherwise it will prove to be misleading.
The role of cost accountant may be enumerated as under:

1. Traditional way: The traditional functions comprise the routine functions of cost
accountant. Such functions are needed to:
(a) prepare cost schedules to assist management in making decisions and in formulating
policies.
(b) Establish various cost centers in the organisation.
(c) prepare reports on wastages of material, loss of labour time, idle capacity of machines
so as to improve profitability of business.
(d) Ascertain the cost of every product, job or process both in terms of total and per unit
of product.
(e) provide necessary data to enable management in fixing the price.
(f) Design suitable system for defining responsibilities and controlling cost.
(g) prepare periodical cost statements and profit and loss account.
(h) Assist management in the valuation of closing stock of raw materials and
work-in-progress so that too much of capital is not locked up unnecessary.
2. Modern way:
(a) To work in close co-ordination with various departmental managers so as to
implement cost reduction programmes and methods of improvement.
(b) To undertake cost audit programmes as per the directives issued by the government
and the provisions of the Indian Companies Act of 1956.
(c) Supervising the functions of mechanised accounting.
(d) Organization of internal audit in the field of accounting.

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