Recent Trends in Responsibility and Inflation Accounting
1. SUBMITTED BY :- SAI VENKETESH
ANUSHKA
JITENDRA
ANSHUMAN
SIDHARTH
RECENT TRENDS IN
ACCOUNTING
2. Responsibility accounting is a system of accounting where specific individual are
made responsible for accounting in particular areas of cost control. In this accounting
system responsibility is assigned based on knowledge and skill. If the cost increases,
the person assigned is held accountable and answerable .
RESPONSIBILITY ACCOUNTING
3. Defining responsibility or cost centre
Tracking the actual performance of teacher responsibility centre
Comparing actual performance with the target performance.
Fixing responsibility for each centre after variance analysis.
Analyzing the variance between actual performance and target performance.
STEPS OF RESPONSIBILITY ACCOUNTING
4. Cost centre:-This centre consist of individual responsibility only for cost control. A
person responsible for a particular cost centre is held accountable only for
controllable expenses.
Revenue centre:-The revenue takes care of revenue, with the company’s sales teams
being mainly responsible.
Profit centre:-A profit centre refers to a centre whose performance is measured in
cost and revenue.
Investment centre:-A manager responsible for this centre is responsible for utilizing
the company assets in the best manner to earn a good return on capital employed.
TYPES OF RESPONSIBILITY CENTRE
5. Inflation accounting is the method used to report financial statements by factoring
in the impact of soaring or plummeting costs of various goods, which are adjusted
according to price indexes to present a clear picture of the firm’s financial position,
usually in times of inflationary environments.
INFLATION ACCOUNTING
6. Current Purchasing Power:- Under this method, the monetary and the non-monetary
items are separated so that monetary items record only a net gain or loss.
Current Cost Accounting:- Under this method , the assets are valued at fair market
value (FMV) rather than their historical cost during the fixed assets purchase.
METHOD OF INFLATION ACCOUNTING
7. Human resource accounting refers to recognizing expenses associated with employees
of an organization, including those for recruiting training. Other costs include
recruitment and selection expenses.
HUMAN RESOURCE ACCOUNTING
8.
9. Historical cost method:- Under this the sum total of all the costs related to human
resource is calculated to find out the value of a human resource. These cost include the
cost of recruitment, selection, training , placement and development of human resource
of an organization.
ADVANTAGES
• This method is very easy to calculate the value of a human resource.
• Employers and employees can easily understand this method.
• This method follows the traditional accounting concept of mathching costs with
revenue.
DISADVANTAGES
• Under this method rate of amortization is very difficult to determine.
• Under this method it is very different to estimate the service period of an employees.
10. Replacement cost method:-This cost is incurred on replacing the existing human
resource by an identical one i.e. human resource capable of rendering similar services.
ADVANTAGES
• This method estimate the present value of human resource.
• This method is very logical and representative.
DISADVANTAGES
• The identical replacement of an employees is not always possible to find.
• The cost of replacing the human resource is inconsistent with traditional accounting
system based on the cost concept.
11. • Opportunity cost method :- This cost is the value of an asset when there is an
alternative use of it. There is no opportunity cost to those employees that are not
scarce, and also those at the top will not be available for auction.
•
• ADVANTAGES
• All the units of factor of production are homogeneous.
• Factor of production are not specific as they can be put to alternative uses.
DISADVANTAGES
• Opportunity cost in the case of factor of production can’t be calculated easily.
• This concept is not applicable in the case of specific factors.