What are the limitations of cost accounting in the Indian context?

Despite its benefits, cost accounting in the Indian context faces several limitations that can affect its effectiveness and relevance in decision-making processes. One limitation is the challenge of accurately allocating overhead costs, particularly in industries with complex production processes or diverse cost structures. Overhead allocation methods may not always reflect the actual consumption of resources by different cost objects, leading to distortions in cost information and decision-making. Another limitation is the complexity of managing multiple cost centers or departments within an organization, especially in large and diversified enterprises. Coordinating cost accounting activities, standardizing cost measurement practices, and ensuring consistency across different business units can be challenging. Additionally, integrating cost accounting data with other management information systems, such as financial accounting or enterprise resource planning (ERP) systems, may pose technical and compatibility issues. Despite these limitations, cost accounting continues to play a vital role in facilitating cost management, performance evaluation, and decision-making in Indian businesses, albeit with some challenges that need to be addressed.