Cost accounting refers to that branch of accountancy which is concerned with historical cost or costs which have been already incurred. Given below are some of the advantages of cost accounting for a company –
1. Cost accounting by determining the price of a product helps the company in fixing the price of the product which company wants to sell to its customers.
2. It also helps the management in cost control and cost reduction of the products which company has manufactured with the help of various cost control measures like making cost centers and responsibility centers which makes it easier to identify the reason for cost escalation.
3. It also helps the management in identifying the unprofitable activities and also reduces the inefficiencies which may be present in the company.
4. Cost accounting data can be of great help when it comes to preparing the financial statements like profit and loss, balance sheet, and funds flow statement.
5. It also helps the management in making strategic financial decisions. For example marginal costing helps the management in making various short term decisions related to day to day activities of the business of the company.