Activity Based Costing as a solution for financial reporting

Subject Areas : Management Accounting

Yahya  hassas yeganeh ¹ (ندارد)

Received: 2009-07-01 Accepted : 2009-10-12 Published : 2009-10-23

Keywords: Activity- Based Costing, Traditional Costing, Cost Allocation, Financial Reporting,

Abstract :

Recently in some countries, the activity-based costing method is used for inter organizational reporting in support of management decision making and traditional costing is used for external financial reporting. Utilization of a single costing mechanism will result in cost saving. Some accounting experts have been insisting on using both of the methods. In this paper, these two methods are studied and it is tried to discriminate the outcome of utilizing these two methods and the influence they have on yearly profit and valuation of material and good inventories. It has also been presented that activity based costing method is suitable for inter-organization or external reporting purposes.  Therefore, the argument made by the researchers sympathizing the idea of using both of the methods is disputable.