Maf 635

Q AND A
1.

Explain what is management accounting?

MA is the process of identifying, measuring, analyzing, interpreting and communicating information in pursuit
of an organization's goals. MA also is the process and techniques that focus on the effective and efficient use of
organization resources, to support managers in their task of enhancing the customer value and share holder
value.

2.

Explain how management accounting helps to help to add value of a business

MA helps to help add value of business through:

3.

providing managers with information for strategic planning and decision making

assistance in directing and controlling

motivating managers to achieve organizational goals

measuring performance for both entire organization and sub-units

assessing the organization's competitive position in the rapidly changing business environment

Find out the criticsm of traditional management accounting ang why it was said as had lost its
relevance?

Traditional MA has been criticized because:

4.

Its neglects the high cost post conversion activities while only concentrates on the manufacturing

Backward looking and use past data which may no longer relevant for current decision making

Use only financial measure and ignoring non financial measure

Focus on internal factors rather than external factors

List down stages of evolution of management accounting and their focus

There are 5 stages of evalution of MA

5.

Stage 1 - Refer to Cost Accounting - Focus on manufacturing activities

Stage 2 - Start use MA term - Focus on generating management information for planning and control

Stage 3 - Focus moved to waste reduction and improve value added activities

Stage 4 - Focus in enhancing the creating of value through resources

Stage 5 - Focus on accountable strategic management for long term strategy

Define Strategic Management Accounting

Strategic management accounting (SMA) is a form of management accounting in which it emphasis is placed
on information which relates to factors external to the firm as well as non-financial information and internally
generated information.

6.

Distinguish between the customer value and shareholders value

Customer Value

Shareholder Value

Is the value perceived by the customer

Is the firms ability to efficiently increase the
when they purchase goods or services from
amount of free cash flow over time
the supplier
The benefit customer received in return of
exchanging their money to the supplier

7.

Shareholder value measured by the firm

financial performance in giving return on their
investment

List down features that distinguish between the Strategic Management Accounting from the
traditional management accounting

TRADITIONAL

SMA

internal organization focus

equal internal & external organization

backward looking

target achievement

managing cost - manufacturing cost

managing cost for entire life of products

no consdiration of quality

quality important

no focus on competitors

focus on competitors

no focus on customer satisfaction

focus on customer satisfaction

pass costs to customer

target cost that customer willing to pay

maintain high stock

no stock

no cost reduction

cost reduction

no intergration of e-commerce

integrate the e-commerce

no initiative to improvement

try to improve

short term planning

long term planning

performance evaluation-use financial

measures

performance evoluation-use financial & non

financial measures

8.

Explain the differences between strategy formulation and strategy implementation

Strategy Formulation

Strategy Formulation includes planning and decision-making involved in developing organizations

strategic goals and plans.
It is placing the forces before the action

Strategy Implementation

9.

Strategy Implementation involves all those means related to executing the strategic plans.
It is managing forces during the action.

Distinguish between just in time purchasing and just in time production

Just -in-time purchasing

- is an approach where materials , parts, and other goods are orderd only in quantities required to meet
immediate production needs. These items are then carefully scheduled to be received at precisely the time they
are needed.This increases efficiency, reduces waste, and ultimately minimizes inventory carrying costs.
Just-in-time (JIT) manufacturing
- is a production model in which items are created to meet demand, not created in surplus or in advance of need.
The purpose of JIT production is to avoid the waste associated with overproduction, waiting and excess
inventory, three of the seven waste categories defined in the Toyota Production System

10. Describe the pull method in the just in time system

Pull method in JIT system could be describe as follow:

Use KANBAN as signalling medium for production system (instruction card)

Goods are produced in manufacturing stage only as they are needed at the next stage

Nothing is produced until its signalled from the subsequent process via KANBAN

11. Explain the importance to maintain the good relationship with suppliers in just in time
environment
The importance to maintain the good relationship with suppliers in JIT environment :
1. To ensure the suppliers are able to supply material on time
2. To establish smooth material ordering and delivering process
3. To reduce time for quality checking on trusted suppliers

12. Explain how the just in time system helps to reduce cost
JIT system helps to reduce cost through:

Eliminate cost of maintaining inventory and warehousing

Eliminate cost of defect and obsolete goods and material

Reduce waiting time and its associated non value added cost

13. Define total quality management

Total Quality Management (TQM) is an integrated organizational effort designed to imporve quality at every
level.
It is about meeting quality expectation as defined by the customer (customer defined quality).

14. Explain what is quality cost

Quality cost is a cost associate in producing a good or poor product quality. Good or poor product quality affect
all aspects of the organization and has dramatic cost implications. The most obvious consequence occurs when
poor quality creates dissatisfied customers and leads to loss of business.
Cost of quality could be illustrated as follow :

15. What is conformance cost? Give examples for each type of conformance costs
Conformance cost is the cost inccured for producing poor quality.
Conformance cost could be divided into two categories:
External Failure Cost - cost associated with quality problems that occur at the customer site or costs
incurred after defective products reach customer
-Complaints cost
-Product return cost
-Warranty claim cost

-Product liability cost

-Lost sales cost
Internal Failure Cost - cost associated with discovering poor product quality before the product reaches the
customer site
-Scrap cost
-Rework cost
-Process failure cost
-Process downtime cost
-Price downgrading cost

16. Differentiate between the conformance costs and non conformance costs
Conformance Cost

Non Conformance Cost

Cost incurred in producing good quality

Cost inccured in producing poor quality

Prevention cost:

External Failure cost:

Training, information cost, product design

cost, process cost

Customer complaints, product return, warranty

claims, lost sales

Appraisal cost:

Internal Failure cost:

Inspection and testing, test equipment cost,

Rework cost, scrap cost, price downgrading
operator cost

17. Analyse the relationship between the conformance costs and non conformance costs
Producing both good quality and poor quality products have its own cost to bear by the company.
For conformance cost, the more perfect quality a company want to achieve, the more conformance cost they
would need spent.
For non conformance cost, the more poor quality a company want to produce, the more non conformance
cost they would suffer.

18. Explain what is target costing

Target costing is a pricing method which manufacturer derived the maximum cost they willing to inccurred to
produce a product by subtracting Selling Price with Desired Profit.
19. How target costing can help to reduce cost?
Target costing help to reduce cost when all function of manager need to ensure they are not reaching the
maximum cost (TC) in producing a product. If the cost of producing a product nearly reaching the target
costing amount, they will need to reduce the cost by eliminating non value added cost, simplified the
product features or simplified the manufacturing process.
20. Describe how customers' satisfaction can be achieved using the target costing
Customer satisfaction can be achieved by target costing where manufacturer could produce a product at a
lower cost to satisfy customer need and wants. Hence, customer could satisfy their need and wants at an
affordable price.
Target costing also benefit to customer because manufacturers would compete with each others in their
industry to provide goods and services at the lower price.
21. Distinguish between the traditional pricing method and target costing
Traditional Pricing Method

Target Costing Method

Selling price is determine after the product

have been completed by add desired profit
margin to the production cost.

Managers determine the anticipated selling

price first and deducting it with the desired
profit to derive their target cost.

Selling Price = Cost + Profit Markup

Target Cost = Selling Price - Desired Profit

22. Can you relate the life cycle costing to target costing?

Target costing and lifecycle costing can be regarded as relatively modern advances in management
accounting, so it is worth first looking at the approach taken by conventional costing.
Conventional costing attempts to work out the cost of producing an item incorporating the costs of
resources that are currently used or consumed. Therefore, for each unit made the classical
variable costs of material, direct labour and variable overheads are included (the total of these is
the marginal cost of production), together with a share of the fixed production costs.
The fixed production costs can be included using a conventional overhead absorption rate or they
can be accounted for using activity-based costing (ABC). ABC is more complex but almost certainly
more accurate. However, whether conventional overhead treatment or ABC is used the overheads
incorporated are usually based on the budgeted overheads for the current period.
23. Find out 4 advantages of life cycle costing

Option evaluation - LCC allow evaluation of competing proposals on the basis of through life
costs.

Improve Awareness - LCC provides management with an improved awareness of the factors
that drive cost and the resources required by the purchase.

Improve Forecasting - KCC allows the full cost associated with a procurement to be estimated
more accurately.

Performance trade-off against cost - LCC analysis allows for ac cost trade-off to be made
against the varying attributes of the purchasing options.

24. Explain what is Kaizen Costing

Kaizen costing is define as continuous improvement in organization. It refers to impovement of both process
and people, improving all aspects of an organization all the time.
25. Explain 4 types of e commerce

1. business-to-business (B2B)
B2B e-commerce is simply defined as ecommerce between companies. About 80% of e-commerce is of this type.
Examples:
Intel selling microprocessorto Dell
Heinz selling ketchup to Mc Donalds
2. business-to-consumer (B2C)
Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering
information; purchasing physical goods or receiving products over an electronic network.
Example:
Dell selling me a laptop
3. business-to-government (B2G)
Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public
sector. It refers to the use of the Internet for public procurement, licensing procedures, and other government-related
operations
Example:
Business pay taxes, file reports, or sell goods and services to Govt. agencies.
4. consumer-to-consumer (C2C)
Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers.
Example:
Mary buying an iPod from Tom on eBay
Me selling a car to my neighbour

26. Describe how the Pareto Analysis can help solve problem
Pareto analysis widely known as 80/20 relationship.
In his Pareto principle, it is believe that 20% or population would solve 80% of the problems. A large majority
of problems are produced by a few key causes.
Hence Pareto analysis enable us to see what 20% of cases are causing 80% of the problems and where the
efforts should be focused to achieve the greatest improvement.
27. Distinguish the main difference between the Manufacturing Resource Planning and Enterprise
Resource Planning
Manufacturing Resouce Planning

Enterprise Resource Planning

is a production planning and inventory control

is a method of using computer
system used to manage human resource, financing, technology to link various functions

marketing and enggineering.

accross an entire company

28. List down advantages of ROI

1) Helps managers focus on the relationship between sales, expenses and investment
2) Encourages cost efficiency
3) Discourages excessive investment in operating assets
29. Explain how Residual Income measure is different from ROI
RETURN ON INVESTMENT (ROI)
return on investment (ROI) is a financial measure calculated as profit divided by invested capital..
return on investment (ROI) = profit / invested capital
invested capital is the assets that the investment centre has available to generate profit. this may include
plant, equipment and buildings.
RESIDUAL INCOME (RI)
residual income is the amount of profit that remains (as a residual) after subtracting an imputed interest
charge..
residual income = profit - (invested capital x imputed interest rate)
imputed interest charge is the rate of return that the company expects its environment and is usually based on
the minimum required rate of return on invested capital.
30. Explain the perspectives of a Balanced Score Card
4 perspective of the balance scorecard
1) Financial perspective
- reflect perspective of the shareholders
- summarize the financial outcomes of decision and actions
- measure include cost and product measure, ROI, cash flow measures, and shareholder value
measures
2) Customers perspectvie
- measure the company's succes in achieving customer value
- outcome (lag) measures include csutomers profitability, market share, and number of value customers
- lead indicators include on-time delivery and number of defects
3) Internal business process
- objectives relates to specific processes that contribute to customer and financial objectives

- measures of cost, product quality, time based measures and new product development
4) Learning and growth
- focus in on the capabilities of the organisation to achieve superior internal processes that create both
customer and shareholder value
- delivers long term growth and improvement
- measures focus on employee capabilities, capabilities of information system and organization climate
31. What EVA actually measures?

The Economic Value Added (EVA) is a measure of surplus value created on an investment.

Define the return on capital (ROC) to be the true cash flow return on capital earned on an
investment.

Define the cost of capital as the weighted average of the costs of the different financing
instruments used to finance the investment.

EVA = (Return on Capital - Cost of Capital) (Capital Invested in Project)

32. Distinguish between the lead and lag indicators.
Give example for each.
LAG INDICATORS
- lag indicators are measures that help managers monitor progress towards objectives. while these measures
provide important information the outcomes of decisons and operations, they provide limited informations to
help manager to directly manage performance.
-For examples of lag indicators are aggregate financial measures, market share, and customer satisfaction.
LEAD INDICATORS
- lead indicators are measures that focus on factors that drive outcomes (lag indicators) and provide
information that is actionable. lead indicators often relate to the processes and activities of the business, and
improvements in theses should follow through to improvements in lag indicators over time. lead indicators
often used as the focus for process improvement or cost management activities.
-For example of lead indicators is improved customer service.

33. Explain 4 types of benchmarking

1. Internal benchmarking
benchmarking between business units within the same company or branches.
2. Competitive benchmarking

Company identifying the strengths and weaknesses of competitors in order to assist the prioritization of
areas for improvement.
3.Industry benchmarking
comparing performance against companies that have similar interest and technologies.
4.Best in- class or process benchmarking
benchmarking against the best practices that occur in any industry.
34. List down the advantages of non financial measures over the financial measures
the advantage of non-measures over the financial measures

Closer link to long-term organizational strategies;

Can provide indirect, quantitative indicators of a firm's intangible assets;

Can be better indicators of future financial performance;

Less susceptible to external noise than accounting measures

35. Find out what is meant by critical success factor.

Provide a real company and give a suitable critical success factor for the company

Critical success factors (CSFs) is refer to specific activities, procedures or areas that a business or organization
depends on for its continued survival. Critical success factors are unique to each organization, and will reflect the
current business and future goals. An organizations critical success factors can be identified by applying business
analytics.

Critical Success Factors (CSFs) are best understood by example. Consider a produce store "Farm Fresh
Produce", whose mission is:
"To become the number one produce store in Main Street by selling the highest quality, freshest farm
produce, from farm to customer in under 24 hours on 75% of our range and with 98% customer
satisfaction."
In order to identify possible CSFs, we must examine the mission and objectives and see which areas of the business
need attention so that they can be achieved. We can start by brainstorming what the Critical Success Factors might be
(these are the "Candidate" CSFs.)
The strategic objectives of Farm Fresh are to:

Gain market share locally of 25%.

Achieve fresh supplies of "farm to customer" in 24 hours for 75% of products.

Sustain a customer satisfaction rate of 98%.

Expand product range to attract more customers.

Have sufficient store space to accommodate the range of products that customers want.

Objective

Gain market share locally of 25%

Candidate Critical Success Factors

Increase competitiveness versus other
local stores
Attract new customers

Achieve fresh supplies of farm to customer in 24

hours for 75% of products

Sustain successful relationships with local

suppliers

Sustain a customer satisfaction rate of 98%

Retain staff and keep up customer-focused

training

Expand product range to attract more customers

Source new products locally

Secure financing for expansion

Extend store space to accommodate new products
and customers
Manage building work and any
disruption to the business

Once you have a list of Candidate CSFs, it's time to consider what is absolutely essential and so identify
the truly Critical Success Factors.
And this is certainly the case for Farm Fresh Produce. The first CSF that we identify from the candidate
list is relationships with local suppliers". This is absolutely essential to ensure freshness and to source
new products.
Another CSF is to attract new customers. Without new customers, the store will be unable to expand to
increase market share.
36. List down featuress for an effective performance measurement system

1.

The measurement system must be tied to the vision of the organization.

2.

The measures must be balanced (comprised of financial and non-financial data).

3.

Measures must be dynamic, relevant and timely.

4.

Measures must be communicated and documented.

37. What is a transfer price?

The internal selling price used when goods and services are transferred between profit centres and investment
centres in a decentralised organisation. Revenue for the selling unit and cost for the buying unit. Allows the
selling unit to earn profit to reflect their effort in producing the product
38. Explain 4 types of transfer price

1. MARKET-BASED PRICES.

Where there is a perfectly competitive market for the intermediate product, the current market
price is the most suitable basis for setting the transfer prices.TP s will motivate sound decisions
and form a suitable basis for performance evaluation

2. MARGINAL COST PRICES

Economic theory indicates TP based on the MC of producing the intermediate product at the
optimum output level for the company as a whole will encourage total organizational
optimality.Adopting a short-run perspective to derive MC results in MC = VC and the assumption
that MC is constant per unit throughout the relevant output range.

MC not widely used:

1. Provides poor information for performance evaluation

2. MC may not be constant over entire range of output
3. Measuring MC beyond short-term is difficult
4. Managers reject short-term perspective

3. FULL COST TRANSFER PRICES

Widely used because managers require an estimate of long-run marginal cost for decisionmaking. Traditional costing systems tend to provide poor estimates of long run MC. Does not
enable supplying division to report a profit on goods transferred

4. COST-PLUS A MARK-UP TRANSFER PRICES

Attempts to meet the performance evaluation purpose of transfer pricing (profit allocated to the
supplying division). Results in non-optimal decisions because TP exceeds short-run or long-run
MC. Enormous mark-ups can result when goods/services are transferred between several
divisions.

5. NEGOTIATED PRICES

Most appropriate where there are market imperfections for the intermediate product and
managers have equal bargaining power. To be effective managers must understand how to use
cost and revenue information. Market price may form the starting point, and cost may be the
lower boundary. Whether or not the supplying unit has spare (excess) capacity can influence the
appropriate level of transfer price. Also claimed behavioural advantages.

39. State the general rule of transfer price

Transfer price = variable cost of product plus any spl outlay due to transfer + Opportunity cost to the
company due to transfer
In applying the general transfer pricing rule, we will distinguish between three different scenarios.
First

: No excess capacity ( Transfer price = market price for product)

Second : Excess capacity ( Transfer price = standard variable costs)

Third

: When there is no enough capacity of the suppliying division

40. How company reward system can be designed considering the equity theory

company reward system can be designed considering the equity theory base on this diagram

41. Explain the equity theory

The relationship between inputs employee contribute and the outcomes employee receives effect
the employee's motivation.

Person compares themselves with Other

Person perceived what they input into job

Person perceives what they benefit from job

Person compares input-benefit ratio of him/herself to Other

42. Explain situation where inequity exist

Inequity exist when th input from the employee and his coworker is different but the outcomes received by
both people is the same. Example: employee A has input of 10 working hours and employee B has input of 10
working hours. however the salary (output) received is the same. Therefore this will motivate employee A to
seek justice and his work motivation is disrupted.
43. How management may reduce inequity among its employees?

The management may reduce inequity among its employees by:

1) Change their inputs to match outcomes for example not give full commitment towards the job
2) Try to change reference outcomes or input for example complaining to the supervisor
3) Change their perception of input or outcomes
4) Change their reference person for example compare to other junior not senior
5) Change job for example tender resignation
44. Distinguish between input and output. Give examples
Inputs - what a worker contribute to a job. Example: including effort, loyalty, hard work, commitment , skill,
ability, flexibility, enthusiasm, etc
Outputs - what a worker gets from a job. Example: including financial rewards-salary, benefits and bonus and
intangible: recognition, reputation, responsibilities, sense of achievement and job security
45. Explain 3 components of expectancy theory
There are 3 components of Expectancy Theory:
1. Expectancy - In this component, its concern with E-P (Effort to Performance)
2. Instrumentality - in this component, its concern with P-O (Performance to Outcome)
3. Valence - this is the reward receive by the person either positive reward or negative reward

See below explanation for furher information and understanding

46. Is dissatisfaction EQUAL TO no satisfaction?

yes, dissatisfaction equal to no satisfaction because

Herzburg said - The opposite of satisfaction is no

satisfaction, and the opposite of dissatisfaction is no dissatisaction.

we can refer this diagram to more understand

47. How company can ensure high satisfaction and high motivation of its employees

How company can ensure high satisfaction and high motivation of its employees

Give employees what they want and need.

Communicate well and often.

Coach for success, and practice random acts of kindness.

Act fairly, respect, and create trust

Trust and verify, but also try to make work fun

Give special attention to high-potential employees.

Implement incentive programs.

48. Compare between the hygiene factor and motivator factor.

Give example to support your answer

49. Describe how company can design the reward system by adopting the Hertzberg theory

Herzberg developed a content theory known as the two-factor theory of motivation. The two are called
the dissatisfiers-satisfiers, or the hygiene motivators, or the extrinsic-intrinsic factors. According to the
Herzbergs theory, hygiene factors describe the salary, work conditions, and company policies. Motivation
factors are intrinsic, and satisfiers relate to motivation such as achievement rewards, more important
responsibility and growth (Matteson, 1996). One can describe hygiene factors as a foundation or
platform that one can launch from, but in themselves, they do not motivate.
The assumption we can derive from Herzbergs theory is that managers must provide hygiene factors to
avoid employee dissatisfaction, but also must provide factors intrinsic to the work itself in order for
employees to be satisfied with their jobs (Matteson, 1996). Managers can prevent low performance,
turnover, and low morale by adding both hygiene factors and motivators.
50. Give 4 limitation of maslow theory
1) The Theory is lacking about the motivators of extrinsically driven individuals.
2) Difficult for manager to identify the need level for employees.
3) The Most Powerful unsatisfied need provides the most motivation.
4) The Theory is not empirically supported. Empirically is something that can be proven or verified through
studies or experiments.

51. What is the main difference between Maslow theory and Hertzberg theory?

Main difference between Maslow theory and Hertzberg theory

1. Meaning
Maslow's theory is based on the concept of human needs and their satisfaction.
Hertzberg's theory is based on the use of motivators which include achievement, recognition and opportunity
for growth.
2. Basis of Theory
Maslow's theory is based on the hierarchy of human needs. He identified five sets of human needs (on priority
basis) and their satisfaction in motivating employees.
Hertzberg refers to hygiene factors and motivating factors in his theory. Hygiene factors are dissatisfiers while
motivating factors motivate subordinates. Hierarchical arrangement of needs is not given.
3. Nature of Theory
Maslow's theory is rather simple and descriptive. The theory is based long experience about human needs.
Hertzberg's theory is more prescriptive. It suggests the motivating factors which can be used effectively. This
theory is based on actual information collected by Hertzberg by interviewing 200 engineers and accountants.
4. Applicability of Theory
Maslow's theory is most popular and widely cited theory of motivation and has wide applicability. It is mostly
applicable to poor and developing countries where money is still a big motivating factor.
Herzberg's theory is an extension of Maslow's theory of motivation. Its applicability is narrow. It is applicable to
rich and developed countries where money is less important motivating factor.
5. Descriptive or Prescriptive
Maslow's theory or model is descriptive in nature.
Herzberg's theory or model is prescriptive in nature.
6. Motivators
According to Maslow's model, any need can act as motivator provided it is not satisfied or relatively less
satisfied.
In the dual factor model of Hertzberg, hygiene factors (lower level needs) do not act as motivators. Only the
higher order needs (achievement, recognition, challenging work) act as motivators
52. Distinguish between intrinsic motivation and extrinsic motivation and give example for each
Extrinsic motivation occurs when we are motivated to perform a behaviour or engage in an activity in order
to earn a reward or avoid a punishment.
Examples of behaviours that are the result of extrinsic motivation include:
Studying because you want to get a good grade
Cleaning your room to avoid being reprimanded by your parents
Participating in a sport in order to win awards
Competing in a contest in order to win a scholarship
In each of these examples, the behaviour is motivated by a desire to gain a reward or avoid a negative
outcome.

Intrinsic motivation involves engaging in a behaviour because it is personally rewarding; essentially,

performing an activity for its own sake rather than the desire for some external reward.
Examples of behaviors that are the result of intrinsic motivation include:
Participating in a sport because you find the activity enjoyable
Solving a word puzzle because you find the challenge fun and interesting
Playing a game because you find it exciting
In each of these instances, the person's behavior is motivated by an internal desire to participate in an activity
for its own sake.
53. Find out 5 characteristics of a self actualised person

5 characteristics of a self actualised person is a:

Acceptance and Realism: Self-actualized people have realistic perceptions of themselves, others
and the world around them.

Problem-centering: Self-actualized individuals are concerned with solving problems outside of

themselves, including helping others and finding solutions to problems in the external world. These
people are often motivated by a sense of personal responsibility and ethics.

Spontaneity: Self-actualized people are spontaneous in their internal thoughts and outward behavior.
While they can conform to rules and social expectations, they also tend to be open and
unconventional.

Autonomy and Solitude: Another characteristic of self-actualized people is the need for
independence and privacy. While they enjoy the company of others, these individuals need time to
focus on developing their own individual potential.

Continued Freshness of Appreciation: Self-actualized people tend to view the world with a
continual sense of appreciation, wonder and awe. Even simple experiences continue to be a source of
inspiration and pleasure.

54. Explain how management can fullfill the employees' security needs and social needs

Management can fullfill the employees' security needs and social needs by:
Security needs - provide a safe working environment, retirement benefits and job security
Social needs - create sense of community via team-based project and social events

55. Explain what is environmental costs

Environmental Cost are the cost that an organisations incurs to prevent, monitor and report environmental
impact, as well as any cost of non-compliance with environmental regulations. Examples: the cost of waste
management system (acquisitions cost and ongoing running cost) , environmental training, legal activities and
fines, record keeping and reporting as well as cost of preventing, mitigating and remediating environmental
impacts.
56. Explain 4 types of environmental costs for reporting purposes.

Give example for each.

1) Conventional Costs - Direct cost associated with capital expenditure
2) Hidden Cost - Hidden regulatory cost from activities.
For example, on going cost of cleaning up contaminated land
3) Contingent Cost - Contingent liability arising from failure to clean up contaminated sites.
4) Relationship & Image Costs - Less tangible cost & benefit that relate to consumer perrception and employee
& community relations.
57. Explain the term sustainability
This definition is under text book which sustainability as a development that meets the needs of the present
without compromising the ability of future generations to meet their own needs.
58. Is sustainability accounting THE SAME as CSR?
Yes, because CSR involves organisations taking into account the economic, environmental and social impacts of
their activities when making desicions. whereas Sustainable accounting is new information management and
accouting methods that aim to create high quality information to suppport a corporation in its movement
towards sustainability. This involves identifying, collecting, analysing, and reporting information about the
economic, environmental and social aspects of an organisations activities.