Activity Based Accounting

Activity-Based Accounting (ABA) is a method used in management accounting that focuses on costs associated with specific activities within a business. Instead of spreading costs evenly across products or departments, ABA identifies what drives costs and assigns them based on actual activities. This approach provides more accurate insights into where resources are used, helping managers make informed decisions about pricing, budgeting, and improving efficiency. By understanding the true costs of activities, businesses can better manage resources and improve profitability.