Question

1-Explain professional ethics in the accounting field. Be sure to include and explain competence, confidentiality, integrity and credibility.

2-Explain cost vs. benefits as it relates to accumulating, analyzing and providing accounting information

3- Describe the main differences between traditional accounting systems and Activity Based Cost Accounting systems. Which system is generally considered better and why?

Answer 1

1. Professional ethics in the accounting aim to put in place rules that ensure that all accountants function and perform in a consistent manner. These professional ethics see that all the professionals in this field abide by all the laws and various regulations that cover their area of work. These professional ethics are put in place in the field of accounting sooo that the accounting professionals function responsibly when they undertake any professional accounting work which entails handling and reviewing financial information that is highly sensitive.

It involves the following Principles:

Competence:A a professional accountant must remain up to date with his knowledge and reading. To exercise sound judgment, an accountant must be aware of all the developments that could affect a result or outcome of a descion that he would take.Similar rules also apply to accounting professionals who supervise others. These accountants must ensure that their juniors receive proper training and guidance so that they can handle their professional commitments efficiently.

Integrity:Demonstrating integrity means being straightforward and true in all business and professional relationships. Professional Accountants should make it a point to avoid associating

Confidentiality Disclosure of financial information .An example would be disclosing the sale or amerger by an accounting professional without getting permission violates the trust that is the basis of a professional relationship unless the disclosure is due to a legal or professional reason to do so.

Credibility: It aids or helps to build effective relationships which are based on mutual respect and trust, which in term aids in delivering as per schedule or helps in meeting the deadlines and achieving results ...

2. Benefias it relates to accumulating, analyzing and providing accounting information

Benefits

1. Helps in maintaining the accounting information accurately and that helps in controlling the money and taking better descions as the figures of revenue and expenses are correctly maintained.
2. Maintaing the information in this manner helps in optimizing the business operations.
3. When accounting information is properly kept and maintained and accounting records up-to-date, then . Accurate accounting reduces unnecessary expenses, save you money at tax time and give you better control over your Expenditure and spending of the organization.

Costs

1.Costs associated with proper due diligence and costs related to financial activity

2. The skilled manpower in terms of accounting professionals who can adeptly carry on the job of accumulating and analysing the accounting information.

3. The process of accumulating ,analysing and reporting accounting information also make use of advancements in technoly specific to the field of accounting and that has a cost associated with that.

3. Traditional v/s activity based costing

1. In traditional systems the overheads are first allocated and then apportioned to the various cost centres and then it is finally absorbed to cost objects. On the other hand in Activity based costing the overheads are first assigned to activity pools and then finally they are assigned to the cost objects.
2. In traditional costing the tie factor i.e hours are considered to be the only cost drivers governing the costs in all the departments whereas in activity based costing cost drivers are determined activity-wise.
3. In traditional costing since costs are related to the centers and thereforethey are not realistic of the behavior of the cost whereas since in activity based costing costs are related to activities ,they are more realistic.
4. In traditional costing there may be multiple overheads rate or single overhead rate for the purpose of recovery of overheads. In activity based costing the overhead recovery rate are determined activity –wise and therefore there is no concept of a single overhead recovery rate.

Activity based costing systems are better as it correctly associates costs with the products as it assigns the cost to the various activities based on their resources.