Skip to main content

Spanish Cost accounting of governmental services-Fished out from internet resource.

Cost accounting in meteorology: a pressing need?

The experience of the Spanish National Institute of Meteorology
By Benito R. Mallol1 and Francisco Almonte Gregoria2

Consideration of the costs associated with specific activities in the private sector is a routine affair. Activities carried out in the public sector, particularly those relating to services, are quite another matter, though, for in that field cost accounting is still a little-used tool and there is little understanding of its function and potential benefits.

As a general rule, social welfare policies have unleashed substantial public spending increases in most developed countries. Since such spending exceeds income, those countries’ deficits are growing at an alarming rate.

The constant expansion seen in public services in recent decades is the result of consumers’ growing demand for more and better services. Yet the paucity of public resources calls for an increasingly effective rationalization of the management of spending. This is where cost accounting plays an important role, because accurately identifying and analysing costs, broken down by activity, can help an organization to:
  • Achieve effective management control as a basic tool in the decision-making process;
  • Ascertain in a transparent manner how effectively public resources are being used;
  • Use rigorous procedures in order rationally to establish public rates and prices,
    thereby avoiding inaccuracies that result from arbitrary estimates;
  • Indicate the variations that could occur in the execution of budgetary spending and
    evaluate the budgetary funds requested from, and justified before, the relevant
    Ministry of Finance; and
  • Facilitate the submission of data to supranational organizations.

The experiences in recent years of Spain’s National Institute of Meteorology (INM) have confirmed all of the above. The need for better clarification of expenditure on national and international research and development projects, improved control over the costs incurred by aeronautical meteorology, and better control over public spending in general, are but some of the pressing realities that are well known to, and universally shared by, the world meteorological community.

Advantages of cost accountings

Traditionally, economic information is provided by general accounting activities. Yet this information is not sufficient to enable upper management to take certain decisions regarding the structure of the organization—an exercise that requires cost accounting.

Its purpose is not to provide information on the organization’s cash flows, but rather to analyse its productive processes by focusing on the organization’s consumption (cost elements); units where consumption takes place (cost centres); its purpose (activities); and the relations between all of the above (distribution criteria).

For this reason, and given that cost accounting has no standardized methodology(is a dynamic tool), there is a need for a conceptual model in which the centres and activities are sufficiently well defined in relation to the organization’s information.



1 comment

Popular posts from this blog

Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.

Areas of consequence:
A Standard Costing

Throughput Accounting

Throughput accounting (TA) is an alternative to cost accounting proposed by Eliyahu M. Goldratt. It is not based on Standard Costing or Activity Based Costing (ABC). Throughput Accounting is not costing and it does not allocate costs to products and services. It can be viewed as business intelligence for profit maximization. Conceptually throughput accounting seeks to increase the velocity at which products move through an organization by eliminiating bottlenecks within the organization.

Cost (or Management) accounting is an organization's internal method used to measure efficiency. Since no one outside the organization uses such internal accounts for investment or other decisions, any methods that an organization finds helpful can be used.

Throughput accounting improves profit performance with better management decisions by using measurements that more closely reflect the effect of decisions on three critical monetary variables (throughput, inventory, and operating expense — defin…

Resistence to Change - Approaches of Kotter and Schlesinger

The Six (6) Change Approaches of Kotter and Schlesinger is a model to prevent, decrease or minimize resistance to change in organizations.
According to Kotter and Schlesinger (1979), there are four reasons that certain people are resisting change: Parochial self-interest (some people are concerned with the implication of the change for themselves ad how it may effect their own interests, rather than considering the effects for the success of the business)Misunderstanding(communication problems; inadequate information)Low tolerance to change (certain people are very keen on security and stability in their work)Different assessments of the situation (some employees may disagree on the reasons for the change and on the advantages and disadvantages of the change process) Kotter and Schlesinger set out the following six (6) change approaches to deal with this resistance to change: Education and Communication - Where there is a lack…