FUNCTIONAL-BASED ACCOUNTING Definition

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FUNCTIONAL-BASED ACCOUNTING focuses on organizational units such as departments and plants, uses financial outcome measures and static standards and benchmarks to evaluate performance, and emphasizes status quo and organizational stability. On the other hand, activity-based accounting focuses on processes, uses both operational and financial measures and dynamic standards, and emphasizes and supports continuous improvement. Activity-based accounting adds a process perspective.

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INVESTMENT EXPENSE is any cost of investment realized aside from the principal investment itself. For example:, in mutual funds, investment expesne is normally contained within five types of investment costs that must be measured to determine your total investment expense: a. Annual mutual fund expenses (i.e. the expense ratio) b. Front or back end sales loads; c. Portfolio turnover and trading costs for the fund (i.e. bid/ask spread, premium for large block trades, etc.) d. Brokerage commissions; and, e. Other (i.e., wrap account fees, annuity mortality & expense charges, etc.).

REPRESENTATION EXPENSES are those expenditures whose character and primary purpose is for representational or entertainment related activities, including receptions or banquets.

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