Resource Consumption Accounting

Introduction

Resource Consumption Accounting also known RCA is a fully integrated, effective management accounting system. It provides managers with vital support information using necessary for business optimization. This new approach to accounting was developed mainly on the basis of the German accounting method Grenzplankostenrechnung (GPK). The main aim of resource consumption accounting is to enable quality controllers and project managers to verify their company's profitability in the context of external financial reporting, complying with existing regulatory bodies like IFRS, Securities and Exchange Commission or Internal Revenue Services (IRS).

Concepts of resource consumption accounting

The GPK method of quantity based operational modeling is based on the utilization of fixed as well as proportional costs set up at the resource level within an organization. The pliant use of function based drivers as and when required is based on particular and restrictive rules. Support for multiple level, payment margin based profit and loss statement which supports the decision making process of the company's management without twisting costs and complications related to allocation of costs is another major concept of RCA. This method of accounting is used for transactions of the financial and quantitative as the major source of financial as well as quantitative data. Process modeling is used by the organizations whenever used for the activity based resources.

Core elements of resource consumption accounting

This accounting method is being used by the 'gestion' as well as 'controlling' functions in a number of European companies over the last few years. They have combined GKP's focus on tracking the consumption of resources back to cost centers. Function based costing is used to stress on allotment of resource costs to different functions. It provides a concept of cost management which can deliver many benefits, especially to companies in their manufacturing process. These methods are used to merge with available data in the ERP systems of organizations. Efficient analysis of the consumption of company resources becomes easy as a result. As a result managers don't have to overuse their Activity Based Costing Systems to overview the resource consumption process. This process utilizes a quantity based method. This includes costing as well as 'cost pull' techniques. Unlike the usual Activity Based Costing techniques which are usually used by firms, it doesn't allot costs to products. Rather it helps to analyze whether resources are being used on time as well as quantity units of consumption. Unit prices are used for computing costs. As a result, costs allocated to items are used once quantity resources are done to explain how the financial resources of the company are being consumed.

Conclusion

The Resource Consumption Accounting as a decision supporting tool plays a major role in different business functions like budget, planning and variance analysis. Using it in the day to day financial operations of the company, it helps to manage as well as measure the performance of a company.

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