Management Accounting Essay Example | Topics and Well Written Essays - 1000 words - 1

focus Accounting - Essay ExampleThis report would focus on one of the most employ techniques of focusing accounting, action at law Based Costing and how this report order has changed over a period of time. Activity ground costing has been one of the highly and most used centering accounting technique and it has been further genuine with the passage of time. Activity base management (ABM), time-driven alphabet be further enhancements in ABC to dissemble it more effective for the organizations that adapt it. Accounting has over the years been considered as a practice that is used to record and present the summary of all the transactions that sink in an organization. Accounting was considered a brass that presented historical perspective and was not highly considered in the decision making (Brimson, 1991). However, management accounting and in particular activity based costing has changed the scenario and now accounting information is used by management to make significan t decisions to not only improve the profitability but to also improve the performances of the organizations. Activity based costing is a management accounting technique that allows the management to identify the costs that occur in the organization. This method allows the management to analyze and recognize areas where costs are high or gratuitous cost is incurred thus it helps the management to make decisions to reduce the costs. Therefore by implementing this system or method the management is able to control its overall operational costs to a certain extent (Armstrong, 2002). Organizations that are competing for prices and their profit margin is low (Cagwin, and Bouwman, 2002), implementing ABC could allow them to control their costs and thus reduce the prices of products or earn higher profits (Gosselin, 1997). Therefore an industry that is highly competitive would give them the edge to demean their prices. Although it has been identified that implementing ABC is beneficial fo r the organizations and it can have several benefits. However on the other hand, ABC has its flaws and drawbacks and some of the major drawbacks of ABC are a. Implementing activity based costing in a work industry is difficult (Startton, Desroches, Lawson, and Hatch, 2009). b. There are some costs that are shared between various departments, products, activities and therefore identifying the costs for each activity is difficult (Piper, and Walley, 1991). c. Activity based costing requires time and yet if the organization hires an extra accountant to prepare and implement this costing system, then the individual needs patronize from each department or employees involved in divergent activities. d. The technique focuses on cost minimisation rather than profit maximization (Hicks, 1992) So with the passage of time, organizations identified some of these abovementioned drawbacks while implementing activity based costing methods and then they changed their system or tried to modify how they implement ABC. Some organizations to improve the ability and improve the use of ABC tried to enhance its role and used Activity Based counsel (ABM) rather than Activity based costing (Collier, 2006). ABM offers the organizations in providing information that helps them in making important long term strategic decisions. ABM helps the organizations in understanding the impact of different costs and different decisions and at the same time it offers the