Job costing, generally, means a specific accounting methodology used to track the expense of creating a unique product. Due to the fact that certain projects, such as construction, require different operations, accountants use this methodology to trace the expenses of each job in order to use this information for analysis and tax needs. Job costing forms have spaces to include direct labor, direct materials, and overhead.
Costs stay in the work-in-process account throughout the job. When the job is finally completed, they are transferred to the finished goods account. By using this method, accountants can make sense of complicated jobs which are moving towards the process of completion.
The following are a limitation of job costing
- It is said that it is too time-consuming and requires detailed record keeping. This makes the method more expensive.
- Record keeping for different jobs may prove complicated.
- Inefficiencies of the organization may be charged to a job, though it may not be responsible for the same. In spite of the above limitations, it can be said that job costing is an extremely useful method for computation of the cost of a job. The limitation of time-consuming can be removed by computerization and this can also reduce the complexity of the record-keeping.