Who are they kidding?

Article Abstract:

Terry Smith's 1992 book 'Accounting for Growth' examined dubious accounting practices and their implications for investment performance. It supported the media's allegations that creative accounting may be causing the unpredictability of corporate failures. Smith, who was fired as a senior analyst at UBS Phillips & Drew for publishing the book, identified 12 questionable accounting policies. He argued that the choice of accounting policies could be used to predict corporate failure and that firms using the most creative accounting techniques were likely to be hiding a poor performance. Many of his assertions cannot be substantiated, but his work is nonetheless valuable given its unbiased examination of the use of creative accounting in some of the most powerful firms in the UK. The 1996 edition of 'Accounting for Growth' does not include a 'major companies accounting health check' but simply discusses 15 creative accounting strategies.

Accounting, Criticism and interpretation, Authorship, Smith, William (American legislator), Accounting for Growth (Book)

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Absorption costing

Article Abstract:

Absorption costing is the practice of incorporating all the costs related to making a particular item in the stock valuation. Associated costs may include common ones such as direct materials and direct labor costs, as well as less obvious ones such as factory rent and machine maintenance. Therefore, the objective of absorption costing is to put in all production overheads in the cost per unit calculation. Unfortunately, students find absorption costing unnecessarily complex. However, this process can be made so much easier by subdividing it into simple steps: allocation and apportionment, reapportionment, and absorption. After these three steps are performed, the value of the stock can then be computed. An example of absorption costing activity is presented.

Accounting and auditing, Inventory control, Cost accounting

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