Dear All,
With Thyra’s last post on June 13, our financial analysis educational series comes to an end for this year.
Please feel free to e-mail us or comment in blog posts if you have any questions.
We hope you enjoyed the series and benefited from them.
Best,
Deniz
a) Shortage of a comprehensible business purpose- ABC is not sufficed to be an accounting exercise in whole for financial analysis tools. To this, it must be designated with a particular purpose like to improve the redesign of processes, endow better product change decisions or to affect product design alterations.
The activity based costing (ABC) is a method used in management accounting, which focuses on the letting resources gain costs, activities use these resources with cost objects (like products or services) and customers are participants of activities. Moreover, the said resource costs have two (2) stages as taught to business owners by accountants from accounting standards.
These are:
I want to add a small discussion on accounting and its difference with managerial accounting, because a lot of readers are confused on this matter, when learning how to write financial statements and its analysis. First, accounting is a very broad branch of the business industry. It, actually, covers various specializations, all bear distinct descriptions by themselves. The three (3) broad areas of accounting: public accounting, governmental accounting and management accounting.
Second, now you know that management accounting is just a part of accounting in the big picture. Yet, it is its biggest area and, also, has a number of departments, like tax accounting, internal auditing and financial analysis accounting, which is our concern for this series.
“Management accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information utilized by management to plan, evaluate, and control within an organization and to assure appropriate utilize of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies, and tax authorities.”
– National Association of Accountants
Also, included in this series are the three (3) most recent developments in doing a cost analysis. Why did I added so? Usually, a financial statement analysis training manual does not include these parts. However, for me, such will affect a business decision, which is, mostly, concerned on finances. Now, the topic of cost analysis comes in, when absorbing production overhead costs are maintained. This is based on the hourly rates of either labor hours or machine hours exhausted. Since, these are new developments. It should bury traditional approaches in cost analysis at the background. With the deepening demands of the economy, competition can never be tougher than ever. Customers today are quick adapting to these changing standards, giving birth to higher levels of needs and even more complex requirements.
Here they are:
