Conventional Absorption Cost Accounting

Having it roots in the 1800’s where factories made a single product and total operating costs were divided by total production volume to arrive at fully-burdened unit costs, conventional costing techniques assign indirect and/or overhead costs through the application of overhead rates. These rates are “allocated” to the outputs of the organization. The manner in which overhead costs are spread across the various Lines of Business (LOB) is to attach such costs to an operational metric associated with LOBs, such as direct labor cost, machine hours, number of employees, floor space, revenues, etc.

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Assessing The Health Of Your Business: The Art And Science Of Accounting

It pays to do things twice in accounting. Italian friar Luca Pacioli established that when he published the first book on double-entry bookkeeping in 1494. The practice is still being used today. Like Pacioli, who was well versed in a wide range of subjects, the art and science of accounting is all about timing and balance.

Double-entry bookkeeping, which requires two-sides to every journal entry, gave birth to the income statement and balance sheet. Together with the cash-flow statement, they create a financial reporting system that keeps your books in equilibrium.

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How Technology has Affected Financial Reporting

In the last decade, the corporate world has witnessed many changes and technology has permeated every aspect of business, including financial and managerial reporting.

Below are three areas where the impact on reporting has been the most significant. If your company isn’t realizing the benefits from these changes, it’s missing a golden opportunity.

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