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What are the practical difficulties in installing cost accounting

Practical difficulties in Installing Cost Accounting
Practical difficulties in Installing Cost Accounting

Practical difficulties in Installing Cost Accounting

In addition to the above problem, a cost accountant will encounter the following difficulties at the time of installation of cost accounting system:

1. Highly expensive

The setting up of a separate 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 taxes are to be incurred.

However, as was mentioned earlier, the system of cost accounting must be a useful investment i.e., benefit 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.

2. Lack of Management Support

If costing system is installed, it is essential to seek the support of different department manager. Very often the managers show hostile attitude towards the cost accounting system.

They feel that this system will interfere in their routine work and probably as a means of checking their efficiency under such circumstances it is better to convince them about the utility of costing system for the business as a whole.

3. Non-cooperation from middle and bottom level management

The middle and bottom level management such as foremen, supervisors and inspectors also fail to extend their wholehearted cooperation fearing additional work which may be entrusted to them.

This problem may be overcome by suggesting them about the simplicity of the system and the existence of a separate cost accounting department to look after costing matters.

However, they may be required to provide necessary reports concerning their area of activity so as to enable functioning of cost accounting department efficiently.

4. Resistance of existing accounting staff

Generally, the existing accounting staff resist the installation of the cost accounting system on two grounds. Firstly, they feel that the new system of accounting might lead to excess work.

Secondly, they are afraid of their job security. But this difficulty may be overcome by encouraging them about the usefulness of cost accounting system as a supplement to financial accounts and the generation of more employment opportunities from the installation of cost accounting system.

5. Lack of trained staff

In olden days this was a great problem. Today this problem has come to an end due to the establishment of the Institute of Cost and Work.

Accountants of India in our country which offers professional course in costing and also offering training facilities through various companies to the candidates under going the course.

In spite of this facility, it is somewhat difficult to get the competent and experienced staff at the time of installation of cost accounting system.

The problem can be overcome by paying attractive salaries to the cost accounts. Steps to Overcome Practical Difficulties-That above difficulties can be overcome by adopting the following steps:

1. Training of existing accounting staff

The existing staff working in the accounts department must be properly trained in costing methods and techniques with help of the Institute of Cost and Works Accounts of India.

2. Proper Supervision

There should be proper supervision after installation and continuous efforts on the part of the cost accountant to make the system successful and to achieve the desired goal of cost ascertainment, cost presentation and cost control.

3. Support from the top management

Before the installation of cost accenting system, there must be firm commitment to the system on the part of the top management. This will create cost consciousness and interest in cost improvement among, technical, production and top management.

4. Costing system according to specific requirements of the concern

The system should be installed and operated according to the requirements of specific case, so that it may not entail heavy cost on the concern. It should avoid additional unnecessary work as far as possible.

The system, when installed and operated, will and operated, will proved many benefits to the Concern as compared to the cost and prove beneficial to the concern.

5. Workers confidence for cooperation

The various employs must be properly educated regarding the benefits which can be obtained from such a system. Workers confidence should be gained in the system to get their co operation before steps are taken to put the system in practice.

6. Utility of system to existing staff

The existing accounting staff should be impressed about the need to supplement the existing financial accounting system. It will broaden the job of an accountant and will create a new opportunities for the accounting staff.

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