On The ABC And Integrated System Of Economic Value Added

With the increasing complexity of product, the roughness of traditional cost calculation method become more and more obvious. If we continuously adopt the traditional accounting system, it causes not to accurately estimate gross profit of every product and win in the competitive conditions. Besides, with the increasing complexity of business operation, the complexity of product and diversification of service increase accordingly, we require more accurately qualify the energy consuming and product combination, pricing and other decisions, which also need more accurate cost information. Therefore Activity-Based Costing appears (namely the ABC), the ABC put forward the new creating and thinking in the cost calculating, it receives the extensive concerns in accurate cost information, improvement of business process, pricing, resource decision and products integration decision to provide perfect information.However, Activity-Based Costing information could not meet the demand of the company in the current competitive condition, in the face of the long-term competition and profit. Though the Activity-Based Costing has an advantage over traditional cost accounting method, but it only tracks the calculation of the operating cost and expenses, which the company's income statement provides, have not fully considered the financial data in company's balance sheet. Namely, Activity-Based Costing accurately apportions the operating cost, but ignores another large cost of enterprises -the apportionment of the capital cost, the calculated cost or expenses under this kind of method is only operating cost or expenses, which is not all the cost that enterprises paid in the producing process. On the basis of this, Integrating Activity-Based Costing and Economic Value Added have appeared, which integrates the traditional added value and law of cost operation together, assimilates the indirect apportion ideas of the law of operation cost while putting forward the apportionment of the capital cost and the calculation method. This paper has introduced the development background of Integrating Activity-Based Costing and...