The assignment of resource costs to activities requires that the resource costs described
in the general ledger be unbundled and reassigned. In a traditional accounting
system, the general ledger reports costs by department and by spending account (based
on a chart of accounts). The $300,000 of nursing salaries, for example, would be
recorded as part of the total salaries of the cardiology unit. The general ledger indicates
what is spent, but it does not reveal how the resources are spent. Of course, the resources
are spent on the basic work (activities) performed in the department. In an
activity-based cost system, costs must be reported by activity. Thus, an ABC system
must restate the general ledger costs so that the new system reveals how the resources
are being consumed. Exhibit 4-12 illustrates the unbundling concept for nursing care
activities in the cardiology unit. As the exhibit indicates, the reassignment of resource
costs to individual activities contributes to the creation of an ABC database for the
organization.