Articles , Page 13
Disadvantages of accounting profit
Profit as a basic profitability indicator used by companies has the following drawbacks: profit does not equal net inflow of money, costs do not equal expenditures and incomes do not equal receipts profit includes the results of operations that are ad-hoc and will not be repeated in the future various methodologies particularly in the ar...
Liquidity indicators
Liquidity is the entity´s ability to convert its assets into cash for the purpose to settle its obligations, ideally with the lowest possible transaction costs. (14) Indicators of liquidity Liquidity indicators show the extent to which the current assets of the company in various forms cover its short-term obligations. Thus, the num...
Standard costing
Standard costing is a cost accounting measurement basis that predicts unit costs and production quantities based on predetermined standards before the production even begins and as such it is an alternative method to historical cost accounting. It is suitable for production, which is standardized and mass or repetitive. Standard costing serves as...
Avoidable costs
Avoidable costs are costs that can be avoided if the activity (mostly production) is discontinued. Opposite to avoidable costs are unavoidable costs.
Cost object
Cost object is an item (object) to which costs are separately measured. Cost object can be a cost center, cost unit, department, process, activity etc.
Unit costing
Unit costing method (also known as output or single costing) is a type of costing method that calculates the costs per cost unit, i.e. usually per a single product. It is used if the production process is repetitive and only a few types of similar products are manufactured in masses. Examples of
Batch costing
Batch costing is a type of costing method that calculates first the costs per the entire production batch. Unit costs are then calculated as a division of total batch costs by the production quantity. Batch costing method is used if several identical products are manufactured in a single batch wher
Costing by simple division
Costing by simple division is costing method, or rather approach to costing, under which are indirect costs (overheads) allocated to the product by their division, i.e. by the formula: indirect costs / number of units. The method is applicable only if a single product is produced. When se
Apportionment of common costs to joint products
During the production process can be manufactured at once two or more products. If they are of similar economic importance and none of them is significantly more important than the other, they are so called joint products. But as the production or its part is common, joint costs are incurred and it
Unavoidable costs
Unavoidable costs are costs that cannot be avoided if the activity (mostly production) is discontinued. Certain type of unavoidable costs are shut-down costs. Opposite to unavoidable costs are avoidable costs.
Cost unit
Cost unit is a type of cost object representing a quantity or unit of product or service, for which costs are ascertained. Different cost units may be applicable in different situations – it depends on the nature of products and production process. Cost unit is not the same as unit cost. Un
Process costing
Process costing method is a type of costing method that calculates first the costs per a single (production) process. The method is based on the assumption that the outputs of previous process are the material inputs to the following process. As the result, the costs per a single product are ascerta
Costing method by division using relative numbers
Costing method by division using relative numbers is costing method, or rather approach to costing, under which are indirect costs (overheads) allocated to the product by using a weight factor that is derived from the feature in which the products differ (e.g. size, time necessary for the production
Common (pre-separation) costs in joint and by product costing
Joint costs (also known as common or pre-separation costs) are costs common to the production process during which are simultaneously processed two or more different products. These costs can be assigned to the individual products by using a specific costing methods (see below). These are
Treatment of joint (common) costs in case of by-products
During the production process can be manufactured at once two or more products. If they are NOT of similar economic importance, then the more important product is called MAIN PRODUCT and the less important product BY-PRODUCT. As by-product´s value is usually negligible, net realizable value