Activity based costing abc is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each this model assigns more indirect costs into direct costs compared to conventional costing cima chartered institute of management accountants defines abc as an approach to the costing . This book describes and explains where activity based concepts fit in the cost and management accounting body of knowledge it first shows the traditional framework of cost concepts terminology and techniques in order to demonstrate how the activity based methods can bring about constructive changes in financial control systems. Activity based costing emerged as an accounting concept in the 1980s in response to global competition in order to demonstrate its advantages and its limitations this book describes and explains where activity based concepts fit into the cost and management accounting body of knowledge. There are other books and articles which give the government emphasis with companion examples but activity based models for cost management systems is a good place to gain the foundation before seeking that information. Integrated cost systems will derive information from the activity based and operational control systems to prepare external financial statements the article mentions that companies can begin to replace the financial reporting system from stage 2 with reconciliation modules that prepare gaap external reporting statements from data that is
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