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Essay / Research Paper Abstract
This 2.5 page paper discusses the benefits of process based accounting (also referred to as activity based accounting). Also included are case studies as to how this system works. Bibliography lists 5 sources.
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2 pages (~225 words per page)
File: D0_MTprobaac.rtf
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Unformatted sample text from the term paper:
rather than looking forward to what might happen. The current system of income statements, balance sheets and cash flow statements focus on past results (Brimson, 2003).
Process based accounting (also known as activity based accounting) is attempting to change all of that. Process based accounting offers an early warning of what might
happen by both considering events that have occurred, costing out based on process and then through that, projecting an upcoming workload (Brimson, 2003). In short, this is a method of
predictive accounting, rather than review accounting (CPA2Biz, 2002). According to Mr. Brimson, by analyzing information about a companys processes, and then applying
that analysis to a statistical process, financial staff can predict a companys performance (CPA2Biz, 2002). In other words, Brimson relies on processes to help accounting become more forward-looking (CPA2Biz, 2002).
Yet how, exactly, does process based, or activity based accounting work? We can answer this question by examining a company that has
actually implemented this particular system (Pare, 1993). In 1991, Dana, an automobile parts manufacturer based in Toledo, Ohio, switched over to a
process based accounting system at its plant in Plymouth, Minnesota (Pare, 1993). In order to implement this system, during the initial six-month stretch, employees in all areas of Danas plant
broke down and defined their activities on a daily basis (Pare, 1993). As an example, in the material-control department (the department that purchases components for the factory and fills
customer orders), a customer service representative ended up spending about 30 percent of the time taking orders and 50 percent actually processing them (Pare, 1993).
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