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CMA Foundation · Fundamentals of Financial and Cost Accounting · Meaning and Significance of Cost Accounting and its Relationship with Financial Accounting

Which of the following is a limitation of financial accounting that cost accounting seeks to overcome?

Financial accounting shows only the overall profit of the business and does not reveal the cost and profit of individual products, jobs or processes. Cost accounting overcomes this limitation by providing detailed, unit-wise cost information to management.

  1. AIt does not follow the double-entry system
  2. BIt records transactions in monetary terms
  3. CIt does not show the cost and profit of individual products or jobs separatelyCorrect
  4. DIt is prepared at the end of an accounting period

Explanation

Financial accounting shows overall profit for the business and does not give the cost or profitability of each product, job or process. Cost accounting supplies this. Using monetary terms and double entry are not limitations that cost accounting removes.

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