Resource Consumption Accounting Essay

1965 WordsAug 20, 20088 Pages
Resource Consumption Accounting Cost accounting is a branch of accounting that deals with how current and future costs are classified, recorded, allocated and reported. The behaviors of these costs are analyzed and summaries are provided to management in order to make internal decisions. Appropriate performance and control changes are made to optimize the costs of doing business. There are many methods and strategies of cost accounting because costs can be recorded, allocated and reported in several different ways. A variety of methods and strategies are needed because organizations have distinct operations which require different reporting methods. Sometimes different methods are blended together to become new methods as is the case with Resource Consumption Accounting (RCA). Resource Consumption Accounting is a comprehensive cost management system. It is an approach to management accounting that includes the best developments of the last several decades from Europe and the United States. Resource Consumption Accounting blends the German cost management system (GPK) with Activity Based Costing (ABC). The merger of these two methods provides a comprehensive approach to management accounting. The German cost management system, Grenzplankostenrechnung (GPK), roughly translates to flexible standard costing in English. It is a collection of advanced costing practices used by many German companies that have very complex manufacturing systems. Activity based costing is a method for determining accurate costs using cost pools and cost drivers. Resources are assigned to activities, then activities are assigned to cost objects based on their use. The difference between these two costing systems is that flexible standard costing is resource oriented while activity based costing is activity and process oriented. Combining the two systems creates a system

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