The effect of activity based cost method on the basic financial reports

With the development of technology, the activities included in manufacturing have varied. And this variation has caused changes in the cost accounting of the product. The use of traditional methods in cost accounting has caused mistakes in accounts and has caused the directors to make wrong decisions. This situation has become a major problem in time and made the emerging of new approaches inevitable. Activity Based Cost System (ABC), which has first suggested by Staubus in 1971 and later supervised by Robert Kaplan and Robin Cooper, is amoung this new approaches. The aim of this study is to prove that ABC presents more reliable data to the management by comparing ABC with the traditional methods through acting from the point where the traditional methods are inefficient and to reflect the effects of these differences (provided by the comparision of ABC and traditional methods) on the basic financial report.