Accounting in its organisational context Essay Example | Topics and Well Written Essays - 1750 words

Accounting in its governingal context - Essay ExampleAdmittedly, many an(prenominal) people dislike change. Thus, the popularity of the traditional costing accounting system still persists until today. The following will explain in detail the many advantages and disadvantages of using the parvenue costing accounting method called Activity Based Costing when contrasted and compared with the Traditional Cost accounting method.Many companies in the United States have shifted from to Activity Based Costing. The front costing method normally used is the traditional based costing. However, the Activity based costing uses several pre -determined cost number one woods that include materials bought to assistance the customers. In addition, the bracing activity based costing method is better than the traditional costing method because this new costing method distributes the total estimated cost of advantage organisation using the daily suffice activities (Caplan et al., 2005 p1).Furt hermore, Activity based costing is a better costing method as compared to the traditional costing method if the service organisation has many different products to market. In a nutshell, activity based costing is better than the traditional method of allocating total costs because it uses activities as the stepping nether region to reach the main purpose of setting up a business which is to generate profits. Finally, activity based costing is a preferred choice because it does not stop its tracks after it manages costs (Krumwiede & Roth, 2004 p 1).The prior costing method normally used is the traditional based costing. There are main features for service organizations in both the United States and the United Kingdom that differentiate it from the traditional method of accounting. One of the main features that distinguishes it as a better costing method is that it has many cost cools unlike the traditional costing method. The traditional costing method normally uses only one or two cost pools. The intimately popular cost pool under the traditional costing method is that total cost is divided by the total number of hours to arrive at a per hour rate. Then the actual number of hours spent for servicing a specific customer service order is multiplied by the pre -determined periodic customer service rate to arrive at the actual cost (Hussein, 2004 p 1).However, the Activity based costing uses several pre -determined cost drivers that include materials bought to service the customers. Also, the number of machine set ups used to repair a car in a car repair centre is one cost driver that that has made this costing method a success. In addition, the number of inspections that have been done in order to determine if the repair shop employees are doing their jobs to watch with the minimum benchmark in terms of job cost and quality is another cost driver that puts activity based costing in juicy demand. This is also used in the traditional cost accounting method (Le wis, 1993 p. 1).In addition, the new activity based costing method is