Archive for August 22nd, 2008

Do cost accounting methods capture all costs or charge the costs against the proper entity?

There are many methods of cash expenditure and cost accounting. We cost objects, processes, activities, stations, products, centers, and other entities. But, is there one entity that we really should be costing in terms of incurring costs and one entity that we should be charging to absorb and manage our costs? Do we really know if we are identifying and capturing all of our costs?

Cost accounting must measure the cost of capital consumed or utilized in performance

We continually make investments to acquire, develop, improve, maintain, and support each capital solution. Costs are incurred through the consumption and utilization of capital in performance. Costs are incurred to reduce the balance invested in the capital utilized to zero over the useful life or planned costing period. So the only entity we should cost is capital consumed or utilized in performance. If we are consuming and utilizing capital, we need to document and manage all the capital that is consumed or utilized, like processes, personnel, capabilities, information, strategies, and equipment. [more...].

Business change and change management are unsolvable problems of 20^th century management used by business enterprises today. The unsolvable problems are caused because the actual business “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results” is not organized or managed. 20^th century management fails to define, organize, and manage the three components of the business.

• Results: The economic outputs of value produced from business performance
• Capital: Investments in the business to provide capital solutions of worth to be utilized in business performance
• Performance: The specific capital solutions utilized in performance to incur costs and to produce specific results

There are only two entities that change in business change and in capital development – results and capital solutions. All business decisions and changes involve results to produce from the business and the human and other capital solutions to utilize in performance to produce results.

If the business is not defined, organized, and managed it is impossible to change the actual business. Instead of changing the business and managing business change properly, 20^th century management lays structures over the business. The organize structure is laid over the business. This is a fatal error. Once an organization structure is laid over the business, the business cannot be managed. [more...]