Characteristics of a Good Costing System
An ideal system of cost accounting must possess some characteristics which bring all the advantages, discussed above; to the business, in order to be ideal and objective. The main characteristics are:
a) Simplicity: It must be simple, flexible and adaptable to the changing conditions. And it must be easily understandable to the personnel. The information provided must be in the proper order, in right time and to the right persons so as to be utilized fully.
b) Flexibility and Adaptability: The costing system must be flexible to accommodate the changing conditions and circumstances. The expansion, contraction of changes must be adopted in the existing system with minimum changes.
c) Economy: The costing system must suit the finance available. The expenditure must be less than the benefits derived from the system adopted.
d) Comparability: The management must be able to make comparison of the facts and figures with the past figures, figures of other concerns, or other departments of the same concern.
e) Minimum Changes to the Existing one: When introducing a costing system, it may cause minimum change to the existing set up of the business.
f) Uniformity of Forms: Forms of different colours can be used to distinguish them. Forms must be uniform in size and quality. Form should contain instructions to fill, to use and for disposal.
g) Less Clerical Work: Printed forms will involve less labour to fill in, as the workers may be a little educated. They may not like to spend much time in filling the forms.
h) Efficient Material Control and Wage System: There must be a proper procedure for recording the time spent on different jobs, by workers for the payment of wages. A systematic method of wage system will help in the control of labour cost. Since the cost of material forms a great proportion to the total cost, there must be an efficient system of stores control.
i) A Sound Plan: There must be proper and sound plans to collect, to allocate and to apportion overhead expenses on each job or each product in order to find out the cost accurately.
j) Reconciliation: The systems of costing and financial accounting must be facilitated to reconcile in the easiest manner.
k) Overall Efficiency of Cost Accountant: The work of the cost accountant under a good system of costing must be clearly defined as to his duties and responsibilities to the firm are very essential.
Also Read: Important Questions for Upcoming Exams
Unit – 1: Basic Concept of Cost Accounting (Part A) and Cost Sheet (Part B)
(These Questions are subject to modification, if necesary. Download DTS Application for complete notes)
Q. What are the advantages and limitations of cost accounting? 2019
Q. “Cost accounting is an essential tool to the Management” –Comment. 2011, 2012
Q. Distinguish and also mention the relationship between
Ø Cost accounting and Financial accounting 2013SN,2016SN, 2018SN
Ø Cost accounting and Management Accounting
Q. Explain the role and functions of cost accountant.
Q. Explain the purposes of classification of costs. Distinguish between direct cost and indirect cost. 2022, 2023
Q. Write Short notes on:
Ø Cost sheet or Statement of Cost 2017SN
Ø 4 Methods of Cost accounting
Ø 4 Techniques of Cost accounting 2019SN
Ø Characteristics of an Ideal Costing System
Or
Unit 1: Part B (Practical)
Practical Problems:
a) Cost sheet focusing on valuation of stock of finished goods, keep in mind expenses ignored in cost accounts, preparation of cost sheet from financial records (refer unit 4 – Reconciliation), profit percentages given on cost price or sale price. Every year
b) Follow 28 solved questions uploaded on my blog
c) Follow examples of BASU AND DAS COST ACCOUNTING BOOK.
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