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Concept of Activity Based Cost Accounting (ABC) can be easily perceived by the students. Two major elements of cost accounting are: performance measures and Cost measures. This method is used in order to measure and compute the methodology of performance and cost of activity resources and cost objects. 

It is just simply a definition of the concept. Moreover, the practical part and application part is more strenuous to grasp. In order to assign the resources in the process of cost accounting it is assigned to the activities and further activities are assigned to cost objects with their use. The fundamental concept of activity based cost accounting is activities utilizing the resources in order to produce the required output.

Expenses should be matched and separated to the level of an activity that consumes the resources. Importantly, the expenses that are required in order to produce should be specifically separated from the expenses that are incurred in order to produce the different services and product or to serve different payers. This type of separation should be independent from the how many units are being sold and produced.
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