ABC Accounting Method

Traditional accounting methods were designed around viteve1870 cost - in 1920 and in those days massively concentrated industry workforce, there was automation of processes and the variety of products was small. The production costs of companies were very small compared to today. Starting from the 1960s - and especially in the 1980s - there were rapid changes. For these and other reasons, traditional methods of cost accounting is called "the number one enemy of production". To remove restrictions classical accounting systems management, which based on organization-ian taylor company, several American companies started to develop in the 1980s, modern accounting systems management - Activity-Based Costing (ABC). The question is if ABC has overcome these problems or not. The answer is yes. In fact, ABC is one of the most important innovations in the field of management in these last 100 years. ABC was clearly defined in 1987 by Kaplan and Ë. Roberts Bruns. They initially focused on the manufacturing industry, where the technology was growing and productivity improvements had reduced the relative proportion of direct costs of labor and materials, but was increased proportionally indirect costs. For example, automation has reduced the cost of labor, which is a direct cost, but increased depreciation, which is an indirect cost. So what is the difference between ABC and traditional methods of cost accounting? Besides the great change in performance, there are three major changes: • According to traditional cost accounting is assumed that the cost objects consume resources, while according to ABC presumably cost objects consume activities • Traditional cost accounting basis used primarily related to volume distribution, while ABC uses "drivers" at different levels.