Essay by EssaySwap ContributorUniversity, Master's February 2008

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The article discusses about features of the German cost accounting system and ways that company running it can exploit its capabilities. Cost accounting in Germany is different compared to that in the US, and software systems are one of the key differences The German software company, SAP, has designed a complex software system that is on its way to becoming a world standard in business software. This system is based on German cost accounting philosophy. Managerial accounting has taken a very different path in Germany than it has in the US. From the beginning, it was separated from financial accounting and organized as a stand-alone system. Although much of its data is pulled from financial accounting, there are several differences in the valuation of positions, which can add up to 10% or more difference between financial and cost accounting data. German coat accounting has its roots in Nazi regime, at which time the economy became state controlled and cost-based pricing became the rule.

A result, it is very detailed guidelines were created to establish a balance between the differing goals of the state and the goals of business enterprise. Managerial accounting in Germany is based on this balance, making it a highly transparent yet highly complex system. Cost engineers analyzed the processes in detail, determined efficient cost functions, and used them to set goals for the cost centers. If these goals were not accomplished, the cost accountants analyzed the differences between target and actual performance and helped the process owner find ways to achieve the goals in the future. This method of cost accounting led to a high degree of theoretical exactness and complexity and allowed German companies to efficiently price their goods. In accounting theory, the principal-agent point of view has led to a new understanding of budgets,