Cost accounting is the process of assembling and evaluating information to discover how an organization can maximize its earning and utilise funds. There are various advantages of cost accounting, here are the few key advantages of to consider cost accounting:
- Cost object analysis- Expenses and revenues can be gathered by cost object, like product line, distribution channel, and by-product to understand which is effective or require additional support.
- Discovers causes-It discovers problems within a firm and learns the specific cause of the issue, additionally suggests solutions to the management.
- Trend analysis- It can track a trend line to find the expense surges
- Determine Cost- It can be used in various level of activity. For instance, if management is looking for a second shift, cost accounting can assume the extra costs linked with the second shift.
- Capacity-The capacity of a business to encourage improved sales levels can be determined by examining the value of its excess capacity.
Quick link: Difference between trade and commerce
What Are The Advantages of Financial Accounting?
The financial statements principal classifications are revenues, expenses, equity, assets and liabilities. Few advantages of financial accounting are:
- Maintenance of Business Record-All the details of the transaction are recorded in the book of account systematically.
- Preparation of Financial Statements-All the records help the accountant to prepare a financial report of the company and check the financial status.
- Comparison of Result-The financial statement reflects the profits of the company which can be used to check the previous year financial status.
- Act as Legal Evidence-It sometimes it acts as evidence for a few cases.
- Boost Leanders-The statement provides required information to the money lenders so that they raise the loans.
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