This is the accounting equation which is followed in balance sheet of any company. The sum of liabilities and equities is equal to the assets of the company. Liabilities of the company finance the assets of the company. The difference between the both is the equity which is bought in by the owners of the company. Owners of the company can be proprietor or the shareholders of the corporation. Any organisation will have its key stakeholders. These bunch of stakeholders look into the performance of the company and will decide its future course of action. For any company the key shareholders are management, shareholders, customer & suppliers. These are the people who look in the annual filings and quarterly filings.
Earlier the cost structures where direct and the product lines were having a direct approach. As the product diversification took place and with automated technology the costing system has not evolved. Low volume products which use more of the activity at cost centers are having the same cost structures as high volume products. This is leading to costing errors. Activity based costing will assign activities that are associated with each of the products. This will help in highlighting the product cost as per their activities. Low volume products which are more complex to create will be marked up in costing, while high volume products which are less complex to create will be marked down.