Question

QUESTION 2
a) Using a company of your choice, explain the implications of setting up an accounting system in that particular company, further explain the considerations to be made for the purchase of the system and the benefits or otherwise of applying such a system in that company. Explain any five disadvantages of cost accounting in a business organization.

b) What challenges are likely to be faced by the cost accountant in the establishment of the systems in your chosen organizations and which types of policies can the organization put in place to ensure the system works? policy formulation.

c) Considering the size of the company you have chosen, advise management by providing 5 advise on the size of the system to be purchased.

Answer 1

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Let the company be XYZ Ltd

Implications of setting up accounting system:

Proper accounting system helps to bring more transparency. It makes the understanding of requirment of finance very clear.

It also helps to carry out the statutory compliances easily.

Maintaining proper accounting system also helps in fair pricing as costs incurred will be properly known.

Consideration while making purchse of system:

The benefits derived should outweigh the costs incurred.

Whether the purpose is fulfilled or not

Are there any cons of purchasing such system

Whether it will be less costlier if set up in-house.

Disadvantages of cost accounting

1) It's time consuming.

2) It's expensive to maintain proper cost accounting

3) It might require the recruitment of additional personnel for the same

4)The accuracy of data also becomes a major factor.

5) Not be suitable for small companies.