Advantages back flush accounting system

The back flush accounting system the cost is allocated to the product at the end of the production process. This is unlike the traditional system where cost is regularly updated during the production process.

The back flush accounting system is only suitable where there is a short process of production and inventory is very low. The back flush accounting system there is no concept of work in progress.

This system basically is not a system because the cost can not allocated to production it is a more like a achievement reporting system.

Advantages back flush accounting system

No detail and complex accounting is required

The biggest advantage of this method that no complicated process of accounting is required. it is to important to remember that accounting for a production process is not an easy task and it vary from industry to industry and sometime organization to organization. Therefore there is no tailor made solution for production process accounting.

There are only two stages where the accounting record is maintained one is at the time of purchase of inventory and other at the time of completion of production. There two points are also know as trigger points in back flush accounting system.

Information about achievement of goal

This system informs management about the achievement of a production goal set by management. Basically this system is goal achieving reporting system and have little role in product costing.

Limitation of back flush accounting system

Only in few cases

This system can be applied only in few circumstances where the production process is very short and the inventory level is negligible.

Management not in a position to control

This system creates no information for the management to monitor the performance and control the activities. So you can say that this system runs automatically and stop automatically and there is no interference is involved from outside.