Note on Activity Accounting

Activity management (AM), according to Johnson (1990), focuses on value chain rather than financial and accounting analyses. Activity cost accounting (ACA) is devoted to ensuring that all costs are minimized by identifying cost drivers and their associated activities and tracing their interactions with other activities. Activity-based costing (ABC) is also concerned with analyses of cost but is best regarded as operating in a special-study mode directed to analyzing and estimating costs for special purposes. One guiding idea of the activity approach is to regard all costs as variable and susceptible to reduction or elimination. Another guiding idea is that routine allocations to determine product or process costs are to be replaced by a special studies approach with attention directed to the activities where costs are occurring and to the particular circumstances for which product or process costs are being calculated. Kohler's activity accounting (1938) is similar to AM, ACA, and ABC. Unlike these more recent approaches, however, it was accompanied by explicity articulated principles of organization, accounting, and budget design.