s and activities associated with the continual repair and maintenance of vessels to maintain their operational status.
The traditional cost accounting process used by ocean shipping companies is incremental in character. Incremental, in a cost accounting process, means that future cost levels are based in part on past cost levels. Both the objects of expenditure format and the natural classification system are used in ocean shipping accounting.
In an objects of expenditure cost classification structure, all of the various types of goods and services that must be acquired and used by an organization are itemized and categorized by function. Where the natural classification system for operating costs considers expenditures on the basis of the good or service involved, such as labor, the objects of expenditure classification system considers operating costs within the context of the function or process involved in an operation.
The objects of expenditure classifications most commonly employed by ocean shipping companies are vessel related, voyage related, cargo related, and passenger related. Vessel related costs involve vessel repair and maintenance, vessel surveys, vessel insurance, crew maintenance, and depreciation. Voyage related costs include fuel, tolls, pilot fees, and so forth. Cargo related costs include dockside handling, loading, and processing. Passenger related costs include passenger service staff, food for passengers, passenger processing, and booking commissions. The natural system of cost classification segregates costs according to fuel, crew, maintenance and repair, capital costs, and so forth.
Product related classifications when applied in the ocean shipping industry treat each voyage as a separate product. Thus, ocean companies following this cost classification procedure adopt a segmented reporting procedure based on the concept that each individual voyage is a separate product.
In this dis...