The Difference between Cost Centre and Profit Centre

When a business grows, its functions, organizational structure, and other related operations also grow in terms of volume and complexity. The management often delegates responsibility to various persons or departments to have better control over the business. These persons or departments are known as responsibility centres. There are four major types of responsibility centres, i.e.,…

The Difference between Cost Centre and Cost Unit

A product or service, a project, a department, or any activity to which a cost corresponds is referred to as a cost object. To be more meaningful, the term ‘cost’ should always be associated with a cost object. A sound costing system requires the establishment of a meaningful cost object. This cost object can be defined…

The Difference between cost control and cost reduction?

To improve profits, two things are necessary – either an increase in revenue or a decrease in costs. But in today’s competitive world, it is not so easy to increase sales to improve profit position. That is why most businesses work hard to keep a check on their costs in order to maintain profitability. Thus,…

The Difference Between Explicit Cost and Implicit Cost?

In a business, when costs are analyzed from a payment point of view, these are segregated into two types – explicit and implicit costs. An explicit cost is a clearly identifiable cost that a business incurs on production, but implicit costs, though occur, cannot be seen. Explicit cost Explicit costs are also known as out-of-pocket…

What is a rolling budget? Pros and Cons of using it

Rolling budgets are becoming very popular among businesses. The concept of rolling budgeting is influenced by a movement named ‘beyond budgeting’ that believes that companies can manage without budgets. The idea is to critically analyze revenue and costs every now and then rather than projecting the figures a year in advance. And that’s exactly what…

What is incremental budgeting? Is it good for your business?

What is incremental budgeting? Every year, annual budget planning takes place in every business. It is commonly seen that as time passes, managers tend to fall into the habit of repeating a similar budget allocation year after year and slightly adjusting the figures to account for inflation. This is one of the widely used, easiest,…

Can performance budgeting help achieve a company’s goals?

Performance budgeting is a type of budgeting that allows you to measure performance at different levels of an organization. It is a process of identifying the results achieved by each division of the organization. For a proper appraisal of each division’s results, the responsibility of every executive in the organization needs to be defined in…