Article 1 Summary
Accounting Article Summary
Cost accounting and management control practices can be traced to supporting the growth of large transportation, production and distribution enterprises during the period of 1850-1925. The need for these areas came in the beginning of the 19th century when firms needed internal administrative procedures to coordinate all the processes involved in their activities. Railroads handled huge amounts of goods/people and money and therefore need a way to summarize this amount of transactions. Railroads also developed a system for evaluating and controlling their subunits’ performance. As companies developed in mass production and distribution the practice of internal accounting spread. Cost sheets were produced by Carnegies’ steel company. They allowed for monthly and eventually daily statements of the company’s costs and provided a way to compare costs from month to month and even with other companies as well as evaluate process improvements, quality of materials and in decision making. These methods of cost accounting only looked at prime costs and did not use the allocation of fixed costs at all.
Scientific management led to the further development of cost accounting methods. Scientific standards for the amount of labor and material used to produce a unit of outcome were used to determine pay and bonuses given to workers on a piece basis. This is also where overhead costs began being measured and allocated. Standard costs also came into use at this time. Breakeven charts that expressed variation of cost with output showed up in writings in both England and the United States as early as 1903.
By 1925 many accounting theories and practices were being used to improve the efficiencies of mass production enterprises. At this time financial, cost and capital accounting were all kept separate. Cost accounting was used to evaluate operating and to make decisions regarding pricing and worker performance.
DuPont is considered to be an
Cost accounting and management control practices can be traced to supporting the growth of large transportation, production and distribution enterprises during the period of 1850-1925. The need for these areas came in the beginning of the 19th century when firms needed internal administrative procedures to coordinate all the processes involved in their activities. Railroads handled huge amounts of goods/people and money and therefore need a way to summarize this amount of transactions. Railroads also developed a system for evaluating and controlling their subunits’ performance. As companies developed in mass production and distribution the practice of internal accounting spread. Cost sheets were produced by Carnegies’ steel company. They allowed for monthly and eventually daily statements of the company’s costs and provided a way to compare costs from month to month and even with other companies as well as evaluate process improvements, quality of materials and in decision making. These methods of cost accounting only looked at prime costs and did not use the allocation of fixed costs at all.
Scientific management led to the further development of cost accounting methods. Scientific standards for the amount of labor and material used to produce a unit of outcome were used to determine pay and bonuses given to workers on a piece basis. This is also where overhead costs began being measured and allocated. Standard costs also came into use at this time. Breakeven charts that expressed variation of cost with output showed up in writings in both England and the United States as early as 1903.
By 1925 many accounting theories and practices were being used to improve the efficiencies of mass production enterprises. At this time financial, cost and capital accounting were all kept separate. Cost accounting was used to evaluate operating and to make decisions regarding pricing and worker performance.
DuPont is considered to be an