ABSTRACT
This chapter reviews both traditional cost accounting, activity-based costing, and then proposes a hybrid form that is based on a review of actual systems in local governments. It reviews the main theories that have attempted to describe cost accounting in organizations with particular attention paid toward studies of government applications. The chapter discusses traditional cost accounting, it is generally recognized that the "traditional" aspect is the standard textbook definition of a general cost accounting system and is a generalization for expository and academic purposes. Traditional cost accounting has been likened to spreading overhead costs over the departments of an organization like peanut butter being spread over a piece of bread. A related theory to both agency theory and contingency theory is the transaction cost economics (TCE) or markets and hierarchies perspective. The review and the variety of cost accounting may be an interesting avenue for research into the often semantically difficult area of cost accounting and cost management in government.
