Historical cost accounting Advantages and disadvantages

Historical cost accounting Advantages and disadvantages Financial policy and accounting Financial policy is to determines hoe a business is to be financed, whether by equity or preference share capital, and extent to which reliance is to be placed upon long term or short term borrowing. In addition the credit and discount policies followed to be determined policies companies have a duty to publish account Historical costing Historical cost is the original monetary value of an economic item. Historical is based on the stable measuring units assumption Historical cost accounting is the situation in which accountants record revenue, expenditure and asset acquisition and disposal at historical cost: that is, the actual amounts of money, or moneys worth, received or paid to complete the transaction. Historical cost accounting is also called because it concern itself with the recording of actual cost on after the date when these are in cured. There are two basic costing system 1 is job costing and 2 is process costing. Actual cost is the part of most modern standard costing system but they are limited value. A basis for the treatment of assets in financial statements where they are recorded at their historical cost, without adjustment for inflation or other price variations What is historical cost accounting? Historical cost is a term used instead of the cost. Cost and historical cost usually mean the original cost at the time of a transaction. Historical cost is helps to distinguish an assets original cost from its replacement cost, current cost, or inflation-adjusted cost. Example, Land purchased in 1992 at cost of $80,000 and still owned by the buyer will be reported on the buyers balance sheet at its cost or historical cost of $80,000 even though its current cost,  replacement cost, and inflation-adjusted cost is much higher today. The cost principle or historical cost principle states that an asset should be reported at its cost (cash or cash equivalent amount) at the time of the exchange transaction and should include all costs necessary to get the asset in place and ready for use. Historical cost principle in accounting Historical cost principle means that assets and liabilities are recorded at their actual historical cost. When an asset is written off, the loss is recorded as the historical cost of the asset less any accumulated depreciation. Typically, the asset would be fully depreciated and thus no loss recorded but this isnt always the case. If the asset is sold the gain or loss is recorded as the amount received for the asset less the historical cost (net of any accumulated depreciation). In both cases, youre using the historical cost as your basis in the asset, but in the write off, you didnt receive anything in return for the asset. To record a sale, you must account for the payment you receive and that amount is of course, the current value of the asset at least its value to someone (the purchaser). Advantages and disadvantages of historical cost accounting Advantages Historical cost accounts are straightforward to produce Historical cost accounts do not record gains until they are realized Historical cost accounts are still used in most accounting systems Disadvantages Historical cost accounts give no indication of current values of the assets of a business Historical cost accounts do not record the opportunity costs of the use of older assets, particularly property which may be recorded at a value based on costs incurred many years ago Historical cost accounts do not measure the loss of value of monetary assets as a result of inflation. Standard costing Standard costing is an important topic of cost accounting. Standard costs are generally connected with a manufacturing companys costs of direct material, direct labor, and manufacturing overhead. Rather than conveying the actual costs of direct material, direct labor, and manufacturing overhead to a product, several manufacturers allocate the expected or standard cost. This means that a manufacturers inventory and cost of goods sold will begin amounts reflecting the standard costs, not the actual costs, of a product. Manufacturers, at rest to pay the actual costs. As a result there are almost always differences between the actual costs and the standard costs, and those differences are known as variances. Standard costing and the related variances is a valuable management tool. If a variance arise, management becomes aware that manufacturing costs have different form the standard (planned, probable) costs. If actual costs are greater than standard costs the variance is unfavorable. An unfavorable variance tells management that if everything else stays constant the companys actual profit will be less than planned. If actual costs are less than standard costs the variance is favorable. A favorable variance tells management that if everything else stays constant the actual profit will likely exceed the planned profit. The earlier that the accounting system reports a variance, the earlier that management can direct its notice to the difference from the planned amounts. If we assume that a company uses the perpetual inventory system and that it carry all of its inventory accounts at standard cost (including Direct Materials Inventory or Stores), then the standard cost of a finished product is the sum of the standard costs of the inputs:   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  1. Direct material   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  2. Direct labor   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  3. Manufacturing overhead   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  a. Variable manufacturing overhead   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  b. Fixed manufacturing overhead Standard costs are those cost which are established through identify an objective connection between specific inputs and estimated outputs. Standard costs are usually related to warily analyze phenomenon both in the laborator and in the work place. Marginal costing Marginal cost is the variable cost of one unit product or service. Marginal cost is alternative method of costing to absorption costing. Marginal cost is variable cost charged as a cost of sale and a contribution cost is calculate (sale revenue minus variable cost of sale). Closing stock of work in progress or finished goods are value at the marginal (variable) production cost. Fixed cost is treating as a period cost and charged into the profit and loss account incurred the period of accounting Marginal production cost per unit of an item usually consists of the following. Direct material Direct labour production overheads Direct labour cost might be excluded from marginal costs when the work force is given number of employees on a fixed wages of salary. Even so it is not uncommon for direct labour to be treated as variable cost. When employee are paid a basic wage for a fixed working period. If in doubt you should tread direct labour as a variable cost unless given clear indicator to the country. Direct labour is a often steep cost. With sufficiently short step to be make a labour cost in a variable. The marginal cost of asset usully consist of the marginal cost of production adjusted for stick movement plus the variable selling cost The most important feature of marginal costing is the division of cost into those which are marginal (variable) those which are fixed. The latter are not apportioned to cost centers or products as under and other costing system. Instead they are charged against sale revenues within the period in which are incurred. this deviation of the cost are there application in a appropriate manner is extremely use full in showing management the effect decision, particularly those connected with short term utilization of production capacity. Principles of marginal costing: The marginal principal costing are as Period fixed cost are same any volume of sales and production (provided the level of activity within the relevant range) . selling by an extra item product or service following are as Revenue will be increase by the sale volume of sold item Cost will be increase by the per unit cost Profit will be increase by the contribution amount earned from the extra item The volume of sales falls by one item. Profit will be fall by amount of earned contribution item Profit is measurement should be based on analysis of total contribution. When a unit product is made the extra cost incurred for the manufacture variable Production cost. fixed costs are unaffected, no extra fixed cost are incurred when output is increased. The valuation of closing stock should be at variable production cost Decision accounting The comparison of an alternative courses of action may be facilitated the use of cost data. Latter may be collected by part of a routine or deal with the special problems when it arise strictly speaking, this is not a separate system. It calls upon another information system which indicates the management project likely maximum profit minimum loss. decision on capital expenditure whether to make or buy., what price should be charged as to subcontract and other important matter may all be assisted by the employment of accounting information. A few words on the role of decision making are very appropriate stage. One of the most important function of top management is to make decision. Irrespective of the method of employed decision making implies a choice from a number of alternative. Ther are two basic selection methods First the selection of the particular field in which the final decisions to be made, production is increased, the labour force may large new machine may be introduced: if sale are to be expanded the initial choice between employing more sales men identifying the advertisement to other sale publicity. Once a initial selection has been made, second choice must be follow, if machine is to be purchased Control accounting The comparison of an alternative courses of action may be facilitated the use of cost data. Latter may be collected by part of a routine or deal with the special problems when it arise strictly speaking, this is not a separate system. It calls upon another information system which indicates the management project likely maximum profit minimum loss. decision on capital expenditure whether to make or buy., what price should be charged as to subcontract and other important matter may all be assisted by the employment of accounting information. A few words on the role of decision making are very appropriate stage. One of the most important function of top management is to make decision. Irrespective of the method of employed decision making implies a choice from a number of alternative. Their are two basic selection methods First the selection of the particular field in which the final decisions to be made, production is increased, the labour force may larger new machine may be introduced: if sale are to be expanded the initial choice between employing more sales men identifying the advertisement to other sale publicity. Once a initial selection has been made, second choice must be follow, if machine is to be purchased

Industry Analysis on Fast Food Essay

1. A few of the chief economic and business characteristics of the global fast-food industry are as follows: In the market growth rate the expected food sales is predicted to increase by $208 billion by 2020 with us already being at $800 billion by 2001. Under entry barriers for the fast-food industry the main concerns would be the entry costs, location, capital cost, and licensing. For a business to have success they must have the right location. Under exit barriers there are land leasing, building leases, capital cost. 2. Some of the driving forces include the quality of the food, price of the food, and the nutritional value. Some of the consumers that are playing an important role in fast food are women employed outside the home, two-earned households, higher income, and smaller size of the family. Increased food spending driven by population growth is just one way consumers will shape the future of the US food system. 3. Five forces: a. Rivalry among competitors- in the fast-food industry it’s who can get the food out the fastest. b. New entrants- the competition is increasing due to not having many entry barriers. c. Substitute products- there are many choices in the fast food industry leaving consumers with so many different choices. Therefore each individual fast-food restaurants needs to differentiate their product so people will want to come back for their product. For example what is it about Popeye’s chicken vs. KFC’s? d. Suppliers and buyers- in the fast-food industry if the buyers aren’t satisfied with the suppliers than they can easily switch their suppliers leaving the suppliers with a disadvantage. Also if suppliers cannot offer something unique that only restaurants can get form them, then they have no power to keep that restaurant’s business. 4. A few factors that are critical to success in the fast-food industry are timeliness of the food, quality of the food, quantity of the food, and the pricing of the food. 5. It’s attractive in they way that with the fast paced growth of the fast-food industry, there are so many restaurants entering because there are minimal entry barriers. Anyone who wants to open a restaurant can. Also, there are very low switching costs, which make restaurants look very appealing to big corporations. It can be unattractive because more and more consumers are willing to spend more money on better quality food rather than the quantity of food at a fast-food restaurant. Also senior citizens and immigrants are more likely to cook at home and move away from the trend.

Henri Fayol five rules of management Essay

Fayol’s first â€Å"rule† is foresight. Coca-Cola â€Å"complete[d] a plan of action for the future† (37) by planning to find a leader that could help â€Å"Coke recapture its previous growth pace and stock value without Goizueta’s legendary leadership.† (W-7) Fayol’s second rule is organization. Coca-Cola took care of this rule of management by being â€Å"very sensitive to local market conditions.† (W-7) They used bottlers that were local or one’s not entirely owned by the Coca-Cola Company. This allocation of local bottle companies â€Å"provide[d] and mobilize[d] resources to implement [Coca-Cola’s] plan.† (37) The next of Fayol’s rules is command. Coke implemented this rule by selecting Douglas Daft to take over as chairman and CEO in 2000 for Douglas Ivester. After being appointed CEO, Daft constructed a new executive management team consisting of just ten persons. This made management of the company more efficient since there were fewer jobs to worry about and fewer resources needed to do these jobs. The fourth rule of Fayol’s model is coordination. Coke had a major problem after introducing New Coke. They solved this problem by refraining to put out new products until they were certain that it would prosper. They resisted the temptation to follow the latest trend and used the motto â€Å"If it ain’t broke, don’t fix it.† When Coca-Cola finally felt ready to put out a new product they introduced Vanilla Coke and non-carbonated beverages to appeal to a broader range of consumers. Finally, Fayol’s last rule of management was control. To keep the company on track with the plan, Daft appointed twenty-four division and operations presidents to make sure the aims of the company were being upheld and attained. 2. Consider the following quote from Coca-Cola’s statement on diversity: â€Å"We embrace our commitment to diversity in all its forms at The Coca-Cola Company as a core value. Diversity – of race, gender, sexual orientation, ideas, ways of living, cultures and business practices – provides the creativity and innovation essential to our economic well-being. Equally important is a highly motivated, healthy and productive workforce that achieves business success through superior execution and superb customer satisfaction.† This quote can be related to the Coke case by the way that Coca-Cola selects its type of advertisement based on the target location. Another way they embrace their commitment to diversity is by their release of new products such as Vanilla Coke and non-carbonated beverages to meet the diverse needs of consumers. The quote can be related to the behavioral approaches to management by Daft’s decision to make the company a more entrepreneurial organization and slimming down on the number of executive managers. 3. How does Coca-Cola score on the eight attributes of performance excellence? On the eight attribute of performance excellence, Coca-Cola scores very well. The eight attributes can clearly be seen in the company: Bias toward action by making a decision to appoint Daft as the new CEO because they feel he will get things done better than Ivester. Closeness to the customers by using local companies to bottle and distribute Coke products so that the community is getting back from the products they purchase. Autonomy and entrepreneurship by coming out with new products like Vanilla Coke, Diet Vanilla Coke, Diet Coke with lemon, and non-carbonated beverages. Productivity through people by giving responsibility for implementing the company’s six strategic priorities to Coca-Cola employees. Hands-on and value-driven by seeking to reach the status the company had  under Roberto Goizueta. Sticking to the knitting by not producing new products after the failure of New Coke and sticking with the original product that got them their success until they were truly ready to release new products. Simple form and lean staff by Daft cutting his executive management team to just ten people.   Simultaneous loose-tight properties by broadening their beverages and creative service while maintaining the same image and standards the company conveys. 4. Do you think Douglas Daft will be successful in regaining the growth and value experienced under Roberto Goizueta? I do not think Douglas Daft will be successful in regaining the growth and value experienced under Roberto Goizueta because there is so much more competition today among carbonated beverages and Pepsi is coming up in status. Another factor is the fact that people are becoming healthier and drinking less carbonated drinks and switching to a healthier choice in water and sports drinks like Gatorade.

Essay on The Neurobiology of Memory and Aging - 1680 Words

The Neurobiology of Memory and Aging I lost my keys again, my mother exclaimed at dinner a few nights ago, I really am getting old. This use of old age as a justification for memory deficits is extremely common. Many people relate old age with loss of memory and other neurobiological functions. Why is it that aging seems to go hand in hand with losing and forgetting things? Is there a neurobiological explanation for this phenomenon? It is clear to neurobiologists that aging results in a decrease in brain size as well as a decrease in the efficiency of brain functions. It has been a widely held belief that aging causes neurons to die and for the overall number of neurons to decrease as one reaches old age. Studies†¦show more content†¦(1). Therefore, once one sees something else or takes part in a new conversation is it difficult to remember all of the details from the one before. Declarative memory includes remembering facts one has used effort to learn in the past, and things one has tried to remember. The last part of memory, procedural memory, consists of everything one has learned by repetition, such as playing an instrument or sport, driving a car, or walking. The brain is dividing into several sections, including the cerebellum, the frontal lobe, and the temporal lobe, among others. The temporal lobe exists in two parts, one on each side of the brain close to the ears. It is largely responsible for the memory system (2). On the medial surface of the temporal lobe there are three important structure that are essential for human functioning. These structures are named, in order from rostral to caudal, the olfactory cortex, the amygdala, and the hippocampus. Together these three structures are referred to as the limbic system (1). Their functions became understood after studying how the brain functions upon loss of each structure. 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