Cost accounting system is an essential tool for any business organization that wants to stay competitive in the market. It is a process of recording, classifying, analyzing, summarizing, and allocating costs associated with the production and sale of goods and services. The system provides valuable information to management for decision-making, planning, controlling, and performance evaluation. Therefore, it is neither unnecessary nor expensive; rather, it is a profitable investment.

Benefits of cost accounting system:

1. Cost control - The system helps in identifying the cost of each product or service and finding ways to reduce it. It provides valuable information on the cost of materials, labor, and overheads, allowing management to make informed decisions about pricing, production, and resource allocation.

2. Planning and budgeting - The system provides a basis for planning and budgeting by estimating the cost of production and sales. It helps in setting realistic targets, allocating resources, and identifying areas for improvement.

3. Performance evaluation - The system provides a means of measuring the performance of the organization, departments, and individuals. It helps in identifying variances between actual and budgeted costs, which can be used to motivate employees and improve efficiency.

4. Decision-making - The system provides valuable information to management for decision-making. It helps in deciding on the most profitable products or services to produce, pricing strategies, and resource allocation.

5. Compliance - The system helps in complying with legal and regulatory requirements, such as tax laws and financial reporting standards. It provides accurate and reliable information for financial statements and tax returns.

Conclusion:

In conclusion, a cost accounting system is essential for any business organization that wants to improve efficiency, reduce costs, and stay competitive in the market. It is a profitable investment that provides valuable information to management for decision-making, planning, controlling, and performance evaluation. Therefore, it is neither unnecessary nor expensive; rather, it is a necessary tool for success.