What are the advantages and disadvantages of Account based profitability analysis vis-à-vis costing based profitability analysis?

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What are the advantages and disadvantages of Account based profitability analysis vis-à-vis costing based profitability analysis?

Post  michael_fico on Fri Mar 23, 2012 8:00 pm

The advantage of Account based PA is that it is permanently reconciled
with Financial accounting.

The disadvantages are that it is not powerful as the costing based PA,
since it uses accounts to get values. No Contribution margin planning
can be done since it cannot access the standard cost estimate. Further
no variance analysis is readily available.

follows: -
· Greater Reporting capabilities since lot of characteristics are
available for analysis.
· This form of PA accesses the Standard cost estimate of the
manufactured product and gives a split according to the cost
component split (from the product costing module) when the bills
are posted.
· Contribution margin can be planned in this module since the
system automatically accesses the standard cost estimate of the
product based on the valuation approaches.
· Variance analysis is ready available here since the variance
categories can be individually mapped to the value fields.


Disadvantages:-
Since it uses a costing based approach, it does not sometime reconcile
with financial accounting.


michael_fico

Posts : 163
Join date : 2012-03-23

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