Resource consumption accounting it is an activity

This preview shows page 22 - 25 out of 104 pages.

Resource Consumption Accounting It is an activity based costing It creates an integrated economic model of operation for decision making It provides the frame work for the capacity management. It focuses on operational cost and resource consumption It produces more accurate results in comparison to the predictive account It provides better information to the managers to make decision. Table 2.2 Categories of accounting
15/ ADTU OLE 2.6 Common Terms Used in Accounting To understand the subject properly first of all one should understand the basic terms described below. Capital: Funds brought by the owners to start a business is called capital. In company capital is collected by issuing shares. Capital used to purchase fixed asset is called fixed capital. Capital used for purchase day to day business affairs is called working capital. Assets: Every enterprise has assets. It is divided into two types such as i) Movable assets ii) Immovable assets. Furniture, machineries, fixtures, cash in hand, stocks are the movable assets. Buildings, plants are immovable assets. Asset may be fixed, current and liquid. Fixed assets are used in the production of goods and services. Examples of fixed assets are plant and machinery and so on. Current assets are those which are receivable within a year. Example- stock in trade, debtors, any receivable and so on. Liquid assets are those which can be easily converted into cash. Ex- investment, cash in hand, cash in bank etc. Liability: The amount which is to be paid in future with respect to payment towards acquisition of an asset or performance of a service. Current liability has to be paid within a year. Ex- Loans taken Goods: Commodities and articles purchased for resale is called goods . Ex- If a sugar dealer purchase sugar for resale then the sugar is called goods. If the sugar dealer purchases a bike for personal use then the bike is called asset. Debtor: Debtor is a person who owes something to business. A person to whom goods are sold on credit becomes a trade debtor to the business. Creditors: A creditor is a person to whom the business owes something. Ex- a person from whom goods are purchased on credit and amount is yet to be paid.
Management Accounting 16/ ADTU OLE Summary First part of the chapter describes the meaning of the Financial Accounting and the various functions related to the accounting. In general the meaning of accounting is collecting, recording and presentation of financial data for management purpose. It describes the functions of financial accounting like recording, reporting classification and summarization. All of the above functions are used in organization for decision making purpose. It covered the characteristics of financial accounting. Accounting follows certain policies, procedures and principles. So accounting is also a scientific approach which is adopted to classify record and analyze the accounting information

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture