Management Accounting - Assignment PDF

ACCOUNTING AND FINANCE- Management Accounting
Executive Summary
The purpose of writing the report is to bring out the difference in traditional and Modern system of
accounting and to highlight the same. It also deals out the outdatedness of the traditional system of
costing and rationale for the same. Further, the report also details out the profitability and allocation
of indirect cost under both the method and highlight the impact of the same in decision making.
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ContentsExecutive Summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Modern Costing System.........................................................................................................................4
Advantage..........................................................................................................................................4
Disadvantage.....................................................................................................................................4
Traditional Costing System....................................................................................................................4
Advantage..........................................................................................................................................4
Disadvantage.....................................................................................................................................4
Comparison of Allocation of cost under Traditional and Modern Costing.............................................4
Conclusion.............................................................................................................................................7
References:............................................................................................................................................7
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Introduction
The term Costing System means a tool or a system under which the cost are allocated to cost objects.
The main purpose of costing is to allocate the cost to each product and the service.Traditional and
Modern approach of costing are the two different types of costing used to allocate the cost.
In the middle of 20th century the idea of traditional costing came in because the production system
was automised.The main purpose to introduce the traditional costing approach was to assess the cost
of production of the unit and to allocate every indirect cost to the cost of product and service.Till the
end of the 20 th century the traditional costing approach was very popular but a sudden need was felt
for a improvement in costing system for a better and improve method of accounting.As a result of
such need led birth to the modern system of costing .As a result primary purpose of developing
modern costing method is to give accurate and relevant facts to the decision makers regarding the
profitability and cost of different products, activities, projects, consumers, responsibility centre etc.
[ CITATION Dru13 \l 1033 ]
Generally traditional costing encompass job order costing and process costing while modern costing
includes activity based costing
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