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Explain about the disadvantages of backflush accounting?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 rohith asked over 2 years ago

Hi, Tell me some disadvantages of backflush accounting?

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7 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

Buildup of work in progress or finished goods needs to be avoided Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore need to be all the stronger. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

Standard costs must be reliably estimated and variances kept to a minimum. The premise of the system is that a sale triggers the manufacturing process, therefore buildup of work in progress or finished goods needs to be avoided Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore needs to be all the stronger. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

> Explain about the disadvantages of backflush accounting? --One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain: --Standard costs must be reliably estimated and variances kept to a minimum --The premise of the system is that a sale triggers the manufacturing process, therefore Buildup of work in progress or finished goods needs to be avoided --Requires an accurate production count. The number of finished goods produced is the multiplier in the backflush equation, so an incorrect count will relieve an incorrect amount of components and raw materials from stock. --Requires an accurate bill of materials. The bill of materials contains a complete itemization of the components and raw materials used to construct a product. If the items in the bill are inaccurate, the backflush equation will relieve an incorrect amount of components and raw materials from stock. --Requires excellent scrap reporting. There will inevitably be unusual amounts of scrap or rework in a production process that are not anticipated in a bill of materials. If you do not separately delete these items from inventory, they will remain in the inventory records, since the backflush equation does not account for them. --Requires a fast production cycle time. Backflushing does not remove items from inventory until after a product has been completed, so the inventory records will remain incomplete until such time as the backflushing occurs. Thus, a very rapid production cycle time is the best way to keep this interval as short as possible. Under a backflushing system, there is no recorded amount of work-in-process inventory.

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Open uri20170510 32134 s5bvk0?1494421637 ARJUN PRATAP SINGH answered over 2 years ago

Dear Friend, as far as your query is concerned that What are the disadvantages of back-flush accounting? Let me informed that Disadvantages of backflush accounting :- One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain: Standard costs must be reliably estimated and variances kept to a minimum The premise of the system is that a sale triggers the manufacturing process, therefore Buildup of work in progress or finished goods needs to be avoided Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore need to be all the stronger. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting Further in other words One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain. Standard costs must be reliably estimated and variances kept to a minimum. The premise of the system is that a sale triggers the manufacturing process, therefore buildup of work in progress or finished goods needs to be avoided Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore needs to be all the stronger. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting Hope answer was helpful to you Regards, Arjun Pratap Singh

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain: Standard costs must be reliably estimated and variances kept to a minimum The premise of the system is that a sale triggers the manufacturing process, therefore Buildup of work in progress or finished goods needs to be avoided

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Picsjoin 2017224123730582 Archana answered over 2 years ago

Hie Rohith, **Disadvantages of backflush accounting :-** - One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain: - Standard costs must be reliably estimated and variances kept to a minimum - The premise of the system is that a sale triggers the manufacturing process, therefore - Buildup of work in progress or finished goods needs to be avoided - Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore need to be all the stronger. - The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting

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Open uri20170510 32134 1uwcnoc?1494421631 Shubhangi Jain answered over 2 years ago

One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain. Standard costs must be reliably estimated and variances kept to a minimum. The premise of the system is that a sale triggers the manufacturing process, therefore buildup of work in progress or finished goods needs to be avoided Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore needs to be all the stronger. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting

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