Applications of management and cost accounting in republic history of Turkey

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Ege Akademik Bak ış / Ege Academic Review 9 (2) 2009: 401-422

APPLICATIONS OF MANAGEMENT AND COST ACCOUNTING IN REPUBLIC HISTORY OF TURKEY

Research Asistant Dr.Seçkin Gönen, Dokuz Eylül University, Faculty Of Economics and Administrative Sciences, Department of Business Administration,[email protected]

Prof.Dr. Süleyman Yükçü, Dokuz Eylül University, Faculty Of Economics and Administrative Sciences, Department of Business Administration,[email protected]

ABSTRACTIn the Republic history of Turkey, with the developments in the area ofeconomy,change intaxsystemsbroughtaboutthebirthof anewoccupationequippedespeciallywithinformationabauttaxlaws.

TheGermanprofessorSachsenberg,whowasbroughttoTurkeytoanalyzethe

Sümerbank’s (established in 1933) subjects of cost in respect to operation,manufacturingandsales,foundedthefirstmoderncostaccountinginTurkey.When we look through the cost accounting system of Sümerbank, weacknowledge that the vapır used in thehosiery, textile finishing andpaintingcost center is obtained through the production of soft water before brackishwater;andthecostsofvaporarecalculatedthroughthisapproachwiththeuseofthecostallocationmethod,whichisalsoknownasthestep-downallocationmethod.

During thatperiod, it is acknowledged that the costs were monitored on thebasisofcostcenterandthecostofeverycostcenterwascalculateddistinctlyasmaterial,directlaborandfactoryoverheads.Thecostitemapproachisalsoseen at the cost allocation table of Sümerbank. Furthermore, the studiesconcerning the establishment of the modern cost accounting and reportingsystemwas inauguratedby theCommissionofReorganizingStateEconomicEnterprise,FinanceandAccountingGroupin1964.

Key words: CostAccounting,ManagementAccounting

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Seçkin GÖNEN ve Süleyman YÜKÇÜ

1. INTRODUCTIONAs in developed countries, the development and the implementation ofaccounting,togetherwithcostandmanagementaccountingoccuredinTurkeyin the modern way during the 19th and 20th centuries when the industrialrevolutiontookplace.Inthatera,theTaxProcedureLaw,TurkishCommercialCode, Associations of Banks, State Economic Enterprise and the Code ofCapitalMarketsBoardtriedtoexecutetheregulationsregardingtheaccountingoperationsdistinctly.In our study, after reporting the developments in cost and managementaccounting in a historical order, cost accounting system is intended to beexplainedwithexamplesinSümerbank,whichisofgreatimportanceinTurkey’seconomic development and known to be one of the biggest state economic

enterpriseoftheperiod2. STRUCTURAL DEVELOPMENTS IN ACCOUNTINGPROFESSION BETWEEN THE YEARS 1923 AND 1960

Accounting education and application in Turkey started in the nineteenthcentury in modern meaning. At this period, Turkish Commercial Code, TaxProcedure Law, Ministry of Finance, Union of Banks, EconomicGovernmentEnterprisesandCapitalMarketsBoardsetouttoarrangetheregulationsaboutaccounting independent from each other. However; arrangements doneindependentlycauseda really bigproblemforour country’saccountingin therepublicperiod(Pur,1995;101).

It is accepted that therewas a German influence at accounting theory andapplication in our country between the years of 1926 and 1960. As 865numberedTurkishTradeLawwastakenfromGermanTradeLaw,itissaidthatthereisadominantGermaneffectonTurkishaccounting (Bilginoğlu,1988:15).Thanks to Turkish Commercial Code ,the way of gaining a corporatecharacteristic is determined for enterprises ,each organization acquired aseperate organizational structure and accounting system; in otherwords;systemofcostandmanagement accounting. It isagaindeterminedbythis law how the revenue and costs resulting from debt and credit relationseffectanorganization’sstructureofcost.Inadditiontothis,GermanprofessorSachsenbergwhowasinvitedtoTurkeytosolvethecostissuesonbusiness,productionandsalesinSümerbank,foundedthefirstmodernbusinessaccounting(costaccounting)ofthetimeviaasolemnstudy. From the concepts laid by the uniform accounting system to theconcepts like; cost types and cost center… etc were all established by thisprofessor.Bytheapplicationofsystem,method,principlesandrulesrequiredby cost accounting in Sümerbank, which was established as an EconomicGovernmentEnterprises60yearsago,madeit possibleto solvethefirststepcostproblemsrequiredespeciallyintheareaofindustry(Uragun,1993:6-7).

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APPLICATIONS OF MANAGEMENT AND COST ACCOUNTING INREPUBLIC HISTORY OF TURKEY

The3460numberedlawwhichwasputintopracticeintheyear1938providedthegovernmentownedenterprises and relatedcompanies to manage thesecompaniesaccordingto“operatingbudget”andtomakeacomparisonbetweenthe companies, it adjudicated the preperation of budget, balance sheet,statementof profit and loss,3monthannual reports. However; they couldn’treachthedesiredaimbecausetheywerelimitedtoshape(AkdoğanveAydın,1987;85).Itisquitepossibletostatethat,TaxProcedureLawandIncomeTaxLawandsome related statements whichwere resulted from taxreformmade in1950,laidthefoundationoftoday’saccountingapplications.Theeffectsofthepointedtaxlawswereintwoways.WiththehelpofTaxProcedureLawtheissueof

bookkeeping,documentation,valuationweresortedoutandontheotherhandas both the private sector and the public sector are included in the law acomprehensive arrangement ismade inaccounting applications. At the sametime,asthemainaimofTaxLawistodeterminethetaxbaseitcannotbesaidthat balance sheet,statementofprofitand losswouldaffect the investmentdecisionsinthecapitalmarket(AkdoğanveAydın,1987;85-86).TheTaxProcedureLawprovidedtheariseofitemswhichcanbedefinedascost element or instead can be accepted as period cost. The taxes to beacceptedascostelementandthetaxesnottobeacceptedascostelementsare especially stated.the depreciation system which enables tangible andintangible fixed assets to be accepted as cost elements in the accountingsystem was also determined by this law. The valuation criteria, the

determinationofbalancesheetitemstobeusedinthesevaluationcriteriamadethe issue of taking cost element into consideration clearer formanifacturingbusinesses(productorservice).Inthelightofthisinformation,personelcostsinthebusinessesaretakenasacostelementornot.TheministryofFinanceonlymadearrangementsaboutcostelementsrelatedtotaxbasebutpostponedthecostandmanagementaccountingapplicationstoagreatextent.InthearrangementsmadebyTheMinistryofFinanceespeciallyabsorbing costing system was taken into consideration and movedaccordingly.The arrangements onmanagement accounting such as; variablecostingsystem,standardcostsystemandothercostcalculationsystemswereminimum.VariablecostingsystemandstandardcostsystemarestatedinthestudiesandarrangementsofCapitalMarketsBoard.Eventhoughthesecondbiggeststepontheareaoffinancialacountingandcostaccounting was completed by 3460 numbered law, the studies on costaccountingandthestudiesontheestablishmentofreportingsysteminmodernmeaning started by the Commission of Reorganizing State EconomicEnterprise, Finance and Accounting Group founded in compatible with theninthsubclauseofnumber 440law’s first temporarysection in1964(Uragun,1993;6-7).Oneofthefunctionsofthisgroupisstatedasdeterminingbasesto

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uniformand refine the accounting methods. TheCommission suggested theUniform Accounting System to be compulsory for Economic GovernmentEnterprises and optional for private sector. This system leans on AmericanAccountingtheoryandapplicationstoagreatextent(Yalk ın,1994;11-12).Uniform chart ofaccounts which results from the studies of this group is animportantdevelopmentintheareaofcostandmanagementaccounting.Atthisperiod,the size of theenterprises reached the levelof requiring this chartofaccountssystem.Withthehelpofthisstudytheconceptofcostcenterandthecosttypesisclarified.Openinganaccountinaccordancewithcostelementisalsorealizedduringthesestudies.Forinstance,threedifferentaccounts(directmaterialcosts,directlaborcosts,factoryoverheads)aboutthreeimportantcostelementsarealsoopenedinthechartofaccounts.

In the chart of accounts prepared by the Ministry of Finance in the first ofJanuaryin1994,threedifferentaccountswereopenedaccordingtothesecostelements.Wehavetounderlinethisfact.BecauseintheWesttheconceptsofdirectrawmaterialcostsanddirectlaborcostswerejoinedandnamedasprimecost or direct labor costs and factoryoverheads were joinedand named asconversion costs concepts. The prime cost and conversion cost have nevertakenplaceinchartofaccountsinTurkey(Yükçü,2007a;6).

3. MEMBERS RELATED TO ACCOUNTING BETWEEN THE YEARS OF 1923 AND 1950

Even though there wasn’t an institutional structure members related toaccountingaredividedintotwogroupsasexecutivesandexpertaccountants.Executive accountants are the people who are responsible for carrying outaccountingissueswithinthebusinessandtheyhaveundertakenresponsibilitiesthough there are many changes in the applications. However; with thedevelopmentofbusinessesandinthebusinesseswhichareformedasaresultoftheincreasegovernment’seconomic,financialandsocialfunctionsexecutiveaccountants became a member belonging accounting which evaluatesaccountingrecordsformanyreasons(Erol,2007;13).Executive accountants are named as accountants and vice accountantsaccording to their responsibilities. Accountants are the people who have thenecessaryknowledge, educationand practice tocarryoutaccounting issues,forwardingandmanagingthem.Viceaccountantsareresponsibleforkeepingspecific books, accounts and arranging files.They are asked for having thelimitedknowledgeandexperiencefortheirjobs.Besidesexecutiveaccountantsare given titles as Corporation Accounting, Cost Accounting, InsuranceAccounting,BankAccounting,ConstructionAccounting,AgricultureAccounting,HotelAccounting,DepositoryAccounting... etcaccording to theirspecilizationareaswhichareshapedtradeandindustryaccountswhicharethetwogeneraltypesofaccounting.(Erol,2007;13-14).

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Expertaccountants can also beclassified according to sector theywork, thestatuetheyaresubjecttoandtheirresponsibilities.Thesecanbeexplainedasbelow(Erol,2007;14):

• Senior Public Accountants: They work self-employed to supply ofprivatesector.

• Financial Advisors: They have a specialization on financial issues.They both give information on tax laws. Together with fulfilling theresponsibilities of the tax – payers in the areas of taxation andaccounting, they also arrange the finacialbalance sheetsand theyguideintheissuesoftaxpenalty.

• Auditors:WiththedevelopmentofEconomicGovernmentEnterprises

relatedtocorporationstheyfulfillthedutytoevaluatetheissuesofrevision,supervisionandaccountingwhichareobligatory.

• Business Auditors: They were formed to supply the auditing viaaccountingissuesinbusinesses.

• Public Accountant and Auditors: Theyareplacedinthegovernment’sfinancialstaff.Theirdutyistoinquirewhetherthedeclaredtaxesareinaccordancewiththelaws,theyarecorrectornotanddetectthem.

4. EMERGENCE OF THE NEED OF COST ANDMANAGEMENT ACCOUNTING IN THE REPUBLIC HISTORY OF TURKEY

ThediversityintheapplicationsofcostandmanagementaccountingincreasedinadirectproportionofthedevelopmentinindusryandservicesectorinTurkey.The issues of cost and management loomed large with the increase in thecompetitionandtradeinnationalandinternationalarea.When the Turkish republicwas founded thereweren’t any workshopsoranyimportant factories so, noone needed management accounting systems orcommentsrelatedtocostaccountingtechniques.Atthattime,themainneedofthepublicwhichwas‘bread’notevenbakedinfactoriesorbakeriesinstead;they made their own bread at home. That’s why, the need of cost andmanagementaccountingwasinaminimumextent.MustafaKemalAtatürk;thefounderoftheTurkishRepublic,establishedmany

industrialcomplexesbystatecapitalbecausethepublicmighthavethedifficultyof doing so, Sümerbank about which we would like to mention later, wasfoundedinthisway.Afterthesefactorieswereestablishedtheneedforcostandmanagementaccountingarose.Withthefoundationofpointedfactoriestheuseofcostaccountingtechniquesandthetechniquesofmanagementaccountinganalysisandcommentmethodshadn’tstartedtobeused.Consequently,themanagersofthattimefocusedon

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theproductionoffabric,sugar,flour…etcwhichwerethemainneedsofpublic.Lateron,theincreaseinthenumberofindustrailcomplexesbroughtabouttheneedforcostandmanagementaccounting.5. THE APPLICATION OF MANUFACTURE BOOK IN THEFIRST COST AND MANAGEMENT STUDIES IN THEREPUBLIC HISTORY OF TURKEY

ThefirststepincostandmanagementaccountingwastakenbytheMinistryofFinanceinreactiontotheneeds.WhiletheMinistryofFinancewasdoingthearrangements on accounting they always took the tax issue inconsideration.Themanufacturebook(tookplaceinTaxProcedureLawin1949)

wasalsoaproductofthisimplementation.Taxprocedurelawasksthetradersandinstitutionstokeepamanufacturebookbesidesthebooktheyhavetokeepiftheyareinaconstantproduction.Themanufacturebookisabookwhichhasbeenknownandimplementedasacostaccountingapplicationformanyyears.Inthewestliteraturetheaimofcostaccountingisexplainedascalculatingunitcost.However,theaimofkeepingamanufacturebookisnotcalculatingtheunitcostandtotalcostofthegoodorservice.Inthisbook,insteadofwritingthetotal,calculationsaremadeaccordingtotheamount(Yükçü,2007b;759).WiththeTaxProcedureLawitbecameobligatorytokeepamanufacturebookforindustrailenterprises.However;intheyear1994whenTheCommuniquésintroduced by Ministry Of Finance came into practice, the usage of the

manufacturebookdecreased.Astheenetreprisesusingthe7/Aoptionstatedinthis communiqués,can escape from the obligation of keeping amanufacturebook if they are able to watch their amount movements in their accountingsystems.Ontheotherhandtheusersof7/Aand7/Btheobligationofkeepingamanufacture book is stil going on. However, there is a decrease in itsimportancebecauseoftheaccountingsystemsanddevelopmentsofcomputerprograms.The manufacture book is arranged to make the tax auditing for taxadministration easy. In the west literature, the manufacture book takes thefunction of “Flow of Production” which ismentioned in the “ProcessCostingSystem”partsinthecostaccountingbooks.Theseactionsarewritteninthisbook:

a) Therawmaterialsboughttoacompanyintypeandamount.

b) The types and amount of raw materials given back or sold ascommercialgood.

c) Thetypesandamountofrawmaterialsdirectedtoproduction.d) Thetypesandamountofproducedgood.e) Thetypesandamountofsoldgoods(AppendixAandB).

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Ifcarefullylooked theonestakenasrawmaterialandtheselloffsarealwaysfollowedasanamount.Theveryaimofthetaxdepartmentinkeepingbooksofmanufacture as to quantity is to ensure the balance between the outputaccountsandthequantity.Hence,thedepartmentaimstoprecludetaxlossesand evasions. However, if the enterprise-owners or the accountants areevaluatingthequantitiesregisteredinthesebooks,theycancalculatethecostof rawmaterial consumption,andmoreover,by adding the total of the laborcostsandfactoryoverheads,theycanevenfigurethetotalcost.Suchpracticewasbeingimplementedduringtheyearsof1950,1960and1970.

6. THE SYSTEM OF COST ACCOUNTING IN SÜMERBANK

In1933,theStateforIndustriesandtheTurkishIndustrialBankareassignedtothe responsibility of Sümerbank, a state-owned corporation establishedaccordingto thelawno:2262on3.6.1933.Thereby, thevery firstexampleofStateEconomicEnterpriseswasintroduced.TheobjectivesofSümerbankwereto(Güvemli,2001;458):

• RunthefactoriesunderitsauspicesandmanagetheinterestsharesoftheStateintheprivatesector.

• Prepare appropriate projects in regard to State-owned industrialenterprisesandestablishsuchenterprises.

• Participateinprofitableindustrialenterprises.• Maintainstudentsbothhereandabroadinordertoeducatethefuture

traininginstructorsoftheforemansandworkers.•

Grandloanstotheindustry,executebankingbussiness.WhenSümerbankwasassignedtheduty,itownedthebelowsubjectsastheirfirstcapital(SümerbankKitapçığı,1973;3-4):

• AlltherightsandreservefundtakenoverfromStateforIndustriesOfficeandIndustrialBank.

• Stable and working capital and accumulated deprecation of thefactoriestakenoverfromStateforIndustriesOffice.

• ParticipationstockstakenoverfromStateforIndustriesOffice.Inadditiontothosesubjectsmentionedabove,Sümerbankwasalsoassignedthedutyofaccomplishingtheindustrialenterpriseswhichtookplaceinthe1st

NationalFive-YearedDevelopmentPlan.Sümerbanksuccesfullyachievedmostprojectsintextile,mining,wood-pulpindustry,ceramicsandchemicalindustries(Güvemli,2001;458).Sümerbank’s accounting systemand chart of accountswere good examplesandmovingpointformanypublicenterprises.InSümerbank’scostaccountingsystem, the production of soft water from raw waterwas critically important.Theproduction ofsoftwater from raw, vapor from softwater, electricity from

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vaporwereimportanttoo.Thisstepbystepproductionproposestheuseofstepdownallocationmethodoffactoryoverheadsinmodernliterature.Atthattime,stepdowntecniquewasusedinSümerbankasdirectingrawwaterexpensestosoftwaterandsoftwatercoststoevaporationcosts.The informationaboutthecost accounting applications in Sümerbank was taken from Prof. Dr.NurettinYelken’s lesson notes who worked as a controller in 1950s and 1960s.Followingthedelineationofthecosttypes,costcentersandthedataregardingcostallocationinSümerbank,anexampleofpracticeisevaluated.6.1. Cost Types in Sümerbank Below are respectively explained the circumstantial information and data inregardtothegroupswhichconstitutetheaccountofcosttypesinSümerbank:

6.1.1. Raw Material and Starting Material Consumption Account (DirectMaterial Costs)This account is amain account in which the values concerning the rawandstartingmaterialsconsumedfortheaimofproductionarebeingregistered.Thesubdividedaccountsofthisaccountaregroupedintothreeasstatedbelow:

• PrimaryProductionRawMaterialConsumptionAccount• PrimaryProductionStartingMaterialConsumptionAccount• SecondaryProductionRawMaterialConsumptionAccount

Thematerialswhichcomprisethemainstructureoftheproductsarecalledtheraw and the starting materials. Raw materials are physical elements whichpreservetheiroriginalshaperightfromthesourcestheyareprovided,andareyet tobeprocessed technically.These itemsarealso called basicmaterials.Startingmaterial, aswell asbeingone of themain elements constituting thestructureoftheproduct,isatermusedatthecombinedproductionfactoriesinordertomakethetermdistinguishablefromrawmaterialconsumption.6.1.2. Secondary Material Consumption Account Materialswhichareusedorconsumedinordertogivetheproductthedesiredquality during the manufacturing process; which are also included and dodirectly affect the structure of the product are called secondary materials.Chemical substances, paints, materials preventing creasing can be given asexamplesregardingthiskindofmaterials.6.1.3. Material Consumption Account‘Materials’aretheitemsthatareusedorconsumedintheproductionprocess,yetnotincludedinthestructureoftheproduct.MaterialConsumptionAccountcanbesubdividedintothreegroups:

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• PrimaryMaterialConsumptionAccount• SecondaryConsumptionAccount• MiscellaneousMaterialAccount

6.1.4. Personnel Costs AccountPersonnel costs account displays the payments made to employees in anenterprise regardless of the wage basis. It can be subdivided under thesedivisions:

• Salaries• Supplementalwages/fringebenefits• Compensations• Socialbenefits• Transportationandtravelexpenses• Workforcewages• Supplementalworkforcewages• Socialbenefitsforworkforce• Transportationallowancesandtravelexpensesforworkforce

6.1.5. Insurance Costs AccountItistheaccountwhichthecostsandthepremiumsconcerningtheinsuranceswhich are made on all the economic values comprising the factory assetsagainst theriskssuchasconflagration,earthquake,and flood, arebeingkept

recorded. This account can be grouped as regards the type of the valuesinsured:

• Rawmaterial,startingmaterialandsecondarymaterialinsurances• Materialinsurances• Semi-productinsurances• Productinsurances• Fixedassetinsurances• Motor-vehicleinsurances

6.1.6. Miscellaneous Costs Account

Inthiskindofaccount,severalvariedcostswhichhavenotbeenreferredunderthe previous titles of production accounts are recorded into. Its subdividedaccountsareasfollows:

• Communicationcosts• Researchanddevelopment,PublishingandAdvertisingCosts• Leasingcosts• Commonfundcosts

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• Shippingandporteragecosts• Illuminationandcleaningcosts• Heatingcosts

6.1.7. Taxes, Dues and Fees

Thisistheaccountinwhichthetaxes,duesandfeesandthecontributionsanenterpriseisobligedtopayatgovernmentandprivateagenciesareregistered.Thisaccountcanbesubdividedintogroupssuchas:

• Realestatetaxes• Noteoffeesandnotarialcharges• Motor-vehicletaxes• Contibutions to the Union of Chambers and Stock Exchanges,

professionalorganizations

6.1.8. Fixed Values Depreciation Costs Account

Specified as the fixed values depreciation costs, this account helps keeprecordsofdepreciationshareswhichareappropriatedforallconstantvalues.Consideringitssubdividedaccounts,thesemustbeopenedinconformitywiththefixedvaluesaccount.Thisaccountcanbegroupedasfollows;

• DepreciationofForestandNursery• Depreciationofarragementson-land

• Depreciationofbuildings• Depreciationofmachinery• Depreciationoffacilities• Depreciationofequipment• DepreciationofFurnitureandfixtures• Depreciationofclaims• Depreciationofcontinuedproductionandnewenterprises

6.1.9. Outsourcing Utilities and Services

This account isused to register the costsof the operations whichcannotbehandledwithinthepoweroftheenterpriseduetoitsorganizationaltype;andwhich,hence,requireexternalprocurement.Thistypeofaccountalsoincludesthe costs of externally procured needs such as water and electricity. Thesubdivisionsareasfollows:

• PrimaryProductionCosts• SecondaryProductionCosts• MaintenanceandRepairCosts• WaterandElectricityExternalCosts

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6.2. Cost Centers in Sümerbank

ThemaincostcentersinSunerbankarechieflysubdividedasfollows:

1. Primaryenterprisecostcenters2. Secondaryenterprisecostcenters3. Allocatedcostcenters4. Retainedcostcenters

The sub-divisions of aforementioned cost centers are explained resrectivelybelow:

6.2.1. Primary Enterprise Cost Centers

In industrial enterprises “primary enterprise cost centers” or in other words“production department” ought to be arranged congruously with the chiefobjectiveandthepeculiaritiesoftheenterprise.Consequently,itisprominentthat those itemsbe left inblanks“……………”withoutbeing itemized inorder toachieveacertaincompatibilitywitheverytypeofindustrialenterprise.1.………………productioncostcenter2.………………productioncostcenter3.……………………………………...InSümerbank,costcenterssuchashosiery,textilefinishing,paintingandpleat

areusedasprimaryenterprisecostcenters.Furthermore,differentlysizedwarpthreads are manufactured at the thread center; drapery is manufactured athosiery then finishedsingle, twoor three colouredat the textile-finishing andpaintingcenter.6.2.2 Secondary Enterprise Cost Centers

Inindustrialenterprises,theitemswhichprovidetherecyclingofmiscellaneouscloth leftovers or defective articles spared during themanufacturingprocess,andhelp indirectly themanufacturingof main articles,are called ‘secondaryenterprisecostsenter’or‘secondaryproductioncostcenter’.Asitisunderstoodfromthetitle,subsidiaryarticlesarebeingmanufacturedhere.

1.…………………….productioncostcenter 6.2.3 Allocated Cost Centers

Allocatedcostcenteristheplacewherethecostswhichservefortheauxiliaryand managerial services, and hence, ought to be allocated to primary and

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secondaryproductioncostcentersarebeingcollected.Thiscenteralsoservesfor the workshops which manufacture articles that constitute the primaryproduct.Toillustrate,anumberofcostscanbegiven:1.SecondaryEnterpriseCostCenters A)WaterandEnergy (1)WaterConsumption (A)RawWater (B)SoftWater (2)VaporProduction (3)Electricity

B)MaintenanceandRepair (1)MachineryMaintenance (2)ElectricityMaintenance (3)FactoryPlant/WorkshopMaintenance (4)ConstructionMaintenance2.AuxiliaryServicesCostCenters A)SocialCosts (1)Restaurant (2)Housing (3)Infirmary (4)BabyNursery (5)Other B)GeneralAdministrationCosts

(1)AdministrativeOffices (Manager’sOffice) (Accounting) (Commerce) (Personnel) (Communication) (Law) (2)RawMaterialandOperatingSuppliesDepository (3)ProductDepository (4)Other C)GeneralOperatingCosts (1)OfficesatthePlaceofProduction (2)Laboratory (3)Sewers,Air-Conditioning,Fire-Fighting (4)Other 6.2.4 Retained Cost Center

‘Retained cost center’ is the place inwhich the costs, even though they areincluded in cost accounts, yet since they are not pertaining to direct

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merchandising, andwhich do not require allocation to primary or secondaryproductionplaces,arecollected.Itcanbesubdividedasfollows:

• Purchasingcostcenter• Sellingcostcenter• Deficitcostcenter• Activitiesonprogressandnewenterprisescostcenter

6.3 Allocation of Water and Vapor Production Cost CenterThe establishment can not process the externally-procured water directly toproducevaporduetoitshighlevelofhardness.Thechalkinthewatercalcifiesin the steam boiler, which both diminishes the efficiency and shortens thelongevity of the boiler. Consequently, the water hardness of which is notremovedismerelycalledas‘rawwater’,andthewaterwhichissoftenedcanbecalledas‘softwater’.6.3.1 Allocation of Raw Water CostsThere isa diminutivediscrepancy between the essentialprincipleof the rawwater costs allocation and the afore-mentioned principle of water costsallocation.Thedifferentiationliesonthematterthathardwaterisprocessedinordertoachieveasoftnesswhichisadequateforenablingvaporproduction.Thus,theunitcostofthesoftwaterproductioncanbecalculatedandashareofcostisappropriatedintowatercostcenteraccordingtotheamountofrawwater.

Assume that there are two primary and one secondary enterprises of acompany.Thetotalofmonthlycostattherawwatercostcenteris15.000TL,annualamountofwaterprocuredexternallyis25.000m 3,andthetablethatrawmaterialenterprisepresentstothecostaccountingisasfollows:

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Raw Water Consumption TableConsuming Cost Center Amount of consumptionPrimaryenterprises: Enterprise‘A’ 6.000m3 Enterprise‘B’ 4.000m3SecondaryEnterprises: 20.000m3 Enterprise‘C’ 2.000m3Enterprisecostsbasedonallocation: SoftwaterEnterprise 8.000m3 Electricitymaintenanceworkshop 200m3

Machinerymaintenanceworkshop 150m3

Restaurant 1.900m3 Administrationoffices 850m3 Laboratories 700m3 Parkingbuilding 1.200m3 Total25.000m3Thetotalofthemonthlycostsintherawwatercostcenteriscalculatedasoneunit, dividing it by the total of water consumption amount which soft waterenterpriseusesup.

TotalCostatRawWaterEnterprise

Formula:-------------------------------------------------------=Unit

TotalWaterConsumptionatPrimary, SecondaryandSoftWaterEnterprises 15.000TLFormula:---------------------------=0.75TL/m 3 20.000m3

Thewater consumption of primary and secondary enterprises are separatelymultipliedwiththeunitcalculated,andtheresultisnotedasidesoastocombinethecostsharesofprimaryandsecondaryenterpriseswiththesharesgainedfromtheallocatonofsoftwatercosts.However,theshareofcostswhichfalltosoftwaterenterprise’slotismarkedas‘-‘intherawwatercostcenterinordertobesubstracted from the rawwater costs in the indirect costs section on thesecondpageofthecostaggregationandallocationsheet;andmarkedas‘+’inthesoftwatercostcentersoastobeaddedtosoftwatercosts.Thewater consumptionofprimary, secondaryand soft waterenterprises areseparately multiplied with this unit with raw water amount of the soft waterestablishment,thecost,therefore,isallocated;andthesharesofthecost,thus,arecalculated.

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ShareofEnterpriseA’= 6.000m3×0.75=4.500.-TL.ShareofEnterprise‘B’= 4.000m3×0.75=3.000.-TL.ShareofEnterprise‘C’= 2.000m3×0.75=1.500.-TL.ShareofSoftWaterEnterprise= 8.000m3×0.75=6.000.-TL. 15.000.-TL.Consequently,thesharesofrawwatercostswhichareattributedtotheprimaryand secondary enterprises are noted aside so as to be combined with theshares of soft water costs. However; the share of cost of the soft waterenterpriseismarkedwith‘’+’’attherawwatercostcenterasoneoftheindirectwatercostswrittenonthesecondpageofthecostsaggregationsheet.

Cost Centers Based on AllocationCost Types Soft Water Raw Water……………… ………….. ......………..……………… ………….. ......………..……………… ………….. ......………..……………… ………….. ......………..TotalofDirectcosts 4.000 15.000Watercosts +6.000 -6.0006.3.2. Allocation of Soft Water CostsThecompanyhastwoprimaryandonesecondaryenterprises.Itisassumedthat the total of costs at the soft water cost center is 4.000 TL, the share

incurred in the allocation of raw water costs is 6.000 TL, amount of waterpurchasedfromrawwaterenterpriseinordertodecalcifythewateris8.000m3,andconsumptiontablegiventocostaccountingbythesoftwaterenterpriseislisted below. According to these variables, water bought from raw waterenterpriseis8.000m3.

Table of Soft Water ConsumptionConsuming Cost Center Amount of ConsumptionPrimaryenterprises:Enterprise“A” 1.000m3Enterprise“B” 800m3SecondaryEnterpriseEnterprise“C” 200m3

Allocated-BasedEnterprisecostsVaporenterprise 6.000m3 8.000m3Thetotalofalldirectproductioncostsaccruedinamonthatthesoftwatercostcenterisaddedtotheshareinthecostsofrawwaterenterprise.Therefore,thetotalofdirectandindirectcostsisacquiredasaunitbydividingitbythetotalofsoftwaterconsumptioninprimary,secondaryandvapourenterprises.

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ChargingLimitingValue:SoftWaterDirectcosts+ShareinRawWaterTotal of Raw Water Consumption in Primary,SecondaryandVaporEnterprises

ChargingLimitingvalue:4.000+6.000=1,25TL/m3 8.000The water consumption of primary, secondary and vapour enterprises areseparatelymultipliedwiththisunit,andallocated.ShareofEnterprise“A”: 1.000m3X1.25TL/m3= 1.250TLShareofEnterprise“B”: 800m3X1,25TL/m3= 1.000TL

ShareofEnterpriset:“C”200m3

X1.25TL/m3

= 250TLShareofVaporEnterprise:6.000m3X1,25TL/m3= 7.500TL 10.000TLThe interest in soft water costs allocated to primary, secondary and vaporenterprises is combined with the shares in the penultimate allocation of rawwatercosts,andthecostsareenteredintothewatercostssectioninrespecttocost centers under the indirect costs center on the first page of the costaggregationandallocationsheet.

RawWaterCostInterestSoftWaterCostInterest TotalEnterprise“A” 4.500 + 1.250 =5.750TLEnterprise“B” 3.000 + 1.000 =4.000TL

Enterprise“C” 1.500 + 250 =1.750TL7500 TL, the cost interest in soft water consumed by vapor enterprise, ismarked as ‘’-’’ at the indirect cost center on the second page of the costaggregationandallocationsheetinordertobesubtractedfromsoftwatercostcenterinthedistributedcostcentres;andisalsomarkedas‘’+’’inthevaporcostcentersoastobeaddedtothevaporenterprise’sexpenses.

Allocated Cost Centers Cost Types Vapor Soft Water……………… ………….. ......………..……………… ………….. ......………..……………… ………….. ......………..……………… ………….. ......………..……………… ………….. ......………..TotalofDirectCosts …………. 4.000WaterCosts(RawWater) +6.000VaporCosts +7.500 -7.5006.3.3. Allocation of Vapor Production Cost Centers

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Twotypesofindustrialenterprisesoughttobeconsideredintheallocationofavaporenterprise’sexpenses.

1-Enterpriseproducingitsownelectricitybyutilizingfromvaporenergy

2-Enterpriseprocuringelectricityexternally

In those enterpriseswhich produce electricity domestically bymakinguseofvapor energy, according to the principles explained in the allocation of softwatercosts,thetotaldirectcostsofvaporenterpriseareaddedtotheindirectcostinterestatthesoftwatercostcenter.Thistotalcostiscalculatedasaunitbydividingthevaluebytheamountofvaporconsumptioninprimary,secondaryandelectricityenterprises.Thecalculatedunitismultipliedseparatelywiththeamountofvaporconsumptioninprimaryandsecondaryenterprisesalongwiththeelectricityenterprise;andtherefore,thecostisallocated.Consequently,theelectricityenterprise’scostinterestintheallocationismarkedas‘’-‘’soastobesubtractedfromthevaporenterprise’sexpenses;andas‘’+’’soastobeaddedtotheelectricitycostsattheelectricitycostcenter.In those enterprises which procure electricity externally, themonthly total ofindirectcostsatthevaporenterprise’scostcenterisdividedbythetotalamountofvaporconsumptioninprimaryandsecondayenterprises.

VaporEnterpriseCostCenters+SoftWater’ShareFormula: Total Vapor Consumption of Primary and Secondary

EnterprisesThis unit is multiplied separately with the amount of vapor consumption inprimaryandsecondaryenterprises;hence,everyenterprise’sshareinthecostsofvaporenterpriseiscalculated.To illustrate the explanation above, the aforementioned example is beingcontinuedas:

1. Thecompanyhastwoprimaryandonesubsidiaryenterprises,2. Totaldirectcostsofvapourenterprisecostcenteris3.000TL,anda

shareof7.500TLisincurredintheallocationofsoftwatercosts,3. 8.000tonsofvaporisproducedinanmonth,4. Consumptiontablegiventocostaccountingbythevaporenterpriseis

listedbelow:

AmountofVaporProductionis8.000tons

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Consumption Table

Enterprises Consuming Vapor Amount Of Consumption

PrimaryEnterprises:

Enterprise“A” 4.000Tons

Enterprise“B” 2.000Tons

SecondaryEnterprise: 7.000Tons

Enterprise“C” 1.000Tons

Enterprisecostsbasedonallocation:WaterEnterprise 200Tons

Machinerymaintenanceworkshop 100Tons

Restaurant 400Tons

Administrativeoffices 220Tons

Depositories 50Tons

Offices 30Tons

Total8.000Tons

Let’sapplytheallocationformulaaboveaccordingtothedatagiven:

3.000TL+7.500TLFormula: =1,5Unit

7.000TonsGiventhatthisunitisgoingtobemultipliedseparatelywiththeamountofvaporconsumptionineveryprimaryandsecondaryenterprise,andhence,costsharesaretobecalculatedaccordingly;

ShareofEnterprise“A” 4.000Tonx1,5=6.000TL

ShareofEnterprise“B” 2.000Tonsx1,5=3.000TLShareofEnterprise“C” 1.000Tonsx1,5=1.500TL

10.500TL

Afterwards, these sharesare registered as vapor costs into the primaryandsecondaryenterprisecostcentersonthesecondpageofthecostaggregationandallocationtable.

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Accordingly,CostAllocationSheetisshownas:

Table1: Cost Allocation Sheet

Cost Types CostCenters

Service Department Production Departmentand Secondary

Enterprises Cost Center

RowWater

SoftWater

Vapor A B C Total

TotalDirectCosts 15.000 4.000 3.000

CostAllocationofRaw

Water-6.000 +6.000 4.500 3.000 1.500 9.000

CostAllocationofSoftWater

-7.500 +7.500 1.250 1.000 250 2.500

CostAllocationOfVapor 6.000 3.000 1.500 10.500

Toltal 9.000 2.500 10.500 .......... .......... ...........

7. CONCLUSIONBetween1926-1960,manyimportantimprovementsoccured inour country intheaccounting bussiness.Especially, the firstStateEconomicEnterprisewas

foundedbyGermans,andtheaccountingsystemwasorganizedbythem.Inthemeantime, the accounting system prepared for Sümerbank by Germanprofessor Sachensberg was very well adopted by economic governmententerprisesandthissystembroughtinbrand-newtermsnotusedintheindustryeverbefore.Thesystemalsogainedahugeacclaimintheprivatesector.Costtypes, cost centers, cost allocation sheets were implemented in theSümerbank’s accounting organization,which is also analyzedat thepracticesection of our study. The chart of accounts which was included in theaccountingsystemdesignedforSümerbankwascarriedoutinagoodnumberofStateEconomicEnterprisesestablishedafterward.Asaresultoftheseeconomicdevelopments,firstaccountingapplicationstookplaceinEconomicGovernmentEnterprises,andtheaccountingprinciplesand

applications entered into our laws and Economic Government Enterprises.During this period, the gradually growing private enterprises also used theaccounting systemandapplications which they had adopted from EconomicGovernmentEnterprises. Theprinciples and the norms of accounting, whichmade theirway intotheTurkishCommercial Code in 1937 and into ourTaxLawsthankstosweepingtaxreformsoccurredin1950s,prominentlyinfluencedthenewaccountingpractices.

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InTurkey, the firststudies regardingcostaccountingwereexecutedbyStateEconomicEnterprises.Sümerbankpioneeredthestudiestoo.TheallocationofFactoryOverheadsputintopractiseinanenvironmentvoidofcomputers.Forthefirsttime,step-downmethod(intheallocationofrawwater,softwaterandvapor costs)was used in thesecondaryallocation process. In the secondaryallocationprocess,directmethod (inthe allocation ofelectricitymaintenance,machinerymaintenanceanddiningservicecostcenterstotheproductioncostcenters)wasbeingusedaswelltogetherwiththestep-downmethod.Thetableof cost allocation was also prepared by Sümerbank. Along with theimprovements in the private sector, the cost and management accountingstudies which were initially started by the State Economic Enterprises alsospreaded amongst the private sector enterprises. The implementation of themost contemporary methods, technics and reporting systems of cost and

managementaccountingtookplaceinourcountryparticularlyafterthe1950s.REFERENCESAKDOĞAN, N. ve AYDIN, H., (1987): Muhasebe Teorileri, Gazi ÜniversitesiYayınNo:98,İktisadiveİdariBilimlerFakültesiYayınNo:44,AnkaraÜniversitesiBasımevi,Ankara.BİLGİNOĞLU, F. (1988): Muhasebe Organizasyonu, İstanbul ÜniversitesiİşletmeFakültesiMuhasebeEnstitisüYayınNo:54,MuhasebeEnstitisüEğitimveAraştırmaVakf ıYayınNo:6,YönAjans,İstanbul.EROL, M. (2007): “Osmanlı’dan Günümüze Türk Muhasebe Mesleğindeki

YapısalGelişmeler”AbakuşDergisi.GÜVEMLİ,O.(2001):TürkDevletleriMuhasebeTarihiCumhuriyetDönemiXX.Yüzyıl,Cilt.4,AvcıolBasımYayın,İstanbul.PUR, H. (1995): “Çağlar Boyunca Muhasebe Mesleğinde Statü ve İşlevDeğişmeleri”, Muhasebenin Tarihsel ve Çağdaş Konumlarından GeleceğineBakış, TÜRMOB Yayınları No:23, Muhasebe Bilim Dalı Yayınları No:2, ÜmitYayıncılıkMatbaacılık,Ankara.SümerbankKitapçığı(1973),Cumhuriyetin50.YılındaSümerbank.URAGUN,M. (1993): MaliyetMuhasebesi veMali Tablolar,Yetkin Basımevi,

Ankara.YALKIN, KOÇ Y. (1994): GenelMuhasebe İlkeleri, Uygulaması veTekdüzenMuhasebeSistemiUygulamaları,TurhanKitabevi,Ankara.YELKEN,N.(1984):MaliyetMuhasebesiDersNotları,İzmir.

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YÜKÇÜ,S.(2007a):Yöneticiler İçinMuhasebe:YönetimMuhasebesi,BirleşikMatbaacılık,İzmir.YÜKÇÜ, S. (2007b): Yönetim Açısından Maliyet Muhasebesi, BirleşikMatbaacılık,İzmir.




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Appendix A.: The Manufacture Book

Appendix B: The Manufacture Book



Documents

Applications of management and cost accounting in republic history of Turkey