ABSTRACT
This chapter presents worked activities; discussion points and numerical examples with solutions. These exercise includes the topics of: Double-Entry Book-Keeping; Interpreting Financial Statement; Budgeting; Cost Behaviour and Classification; Break-even Analysis; Marginal and Absorption Costing; Overhead Recovery; Activity Based Costing; Performance Measurement; Variance Analysis; Responsibility Accounting; Investment Appraisal. The example for responsibility accounting highlights the three basic principles which must be considered before tampering with a workable situation by introducing responsibility centres: There should be goal congruency between divisions, and managers should not seek policies which are harmful to the rest of the organisation; Each section should be autonomous with profits independent of other departments; If divisions are to be assessed under responsibility accounting, such judgements should be a reliable measure of their performance, rather than of the financial aspects of the reorganisation. However, in marginal and absorption costing, there might be non-financial or qualitative aspects such as new markets, prestige, foreign advantages, new machine, and environment.
