Skip to content

CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Which of the following is a commonly cited limitation of financial accounting that cost accounting is designed to overcome?

Financial accounting shows only the overall profit or loss of the business and does not give separate cost figures for each product, job or process. Cost accounting overcomes this limitation by ascertaining detailed costs, which helps in pricing, control and decision making.

  1. AIt cannot record cash transactions accurately
  2. BIt does not provide the cost of each product, job or process separatelyCorrect
  3. CIt cannot be used to prepare a balance sheet
  4. DIt ignores all statutory requirements

Explanation

Financial accounting reports the overall profit of the entity and does not give the cost and profit of individual products, jobs or processes. Cost accounting fills this gap through detailed cost ascertainment. Financial accounting does record cash transactions and prepares balance sheets, so the other options are wrong.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Cost and Management Accounting shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Cost and Management AccountingFree diagnostic mock

More Introduction to Cost and Management Accounting questions