Q1. What are the requisites of an effective system of costing?

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Ans. Following are the essentials of a good cost accounting system:

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Simple to Operate: The cost accounting system should be simple to understand and

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operate so that persons involved may not be confused and follow wrong procedures or methods.

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Flexibility: The cost accounting system should be flexible to adopt new

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requirements based on changes occurring in the enterprise due to external conditions.

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Comparability: The costing system should be able to provide comparable data.

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Comparison can be between the figures of two or more periods of the same firm or between

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the figures of the firm and those of the competitors for a particular period or periods.

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