Question

Cost accounting emerged mainly on account of _____________.

• A. Statutory requirements
• B. Competition in the market
• C. Labour unrest
• D. Limitations of financial accounting

Answer 1

The correct option is D Limitations of financial accounting

Financial accounting has certain limitations which can briefly mentioned below:

a) Financial accounting does not provide the detailed information of cost of each product, job or service.

b) Financial accounting does not provide a system of material control.

c) Wages and labor is not recorded for specific job or product.

d) Financial accounting is based on historical data, hence does not provide the cost and expenses of each product on day to day basis.

To overcome the limitations of accounting, cost accounting has emerged.