We discuss and illustrate a low cost method to determine the cost of capital for each product or service sold to each customer.  This information is useful to businesses requiring significant investment in working capital and/or fixed assets to serve customers.  Traditional accounting measures like “gross profit” do not reflect the financing and opportunity costs of these investments.  Seeing ROI or the economic value for each product and customer can be a competitive advantage.  The product and customer portfolio can be optimized to improve overall return on capital and cash flow.

Measuring ROI at the product level requires assignment of balance sheet resources to each product and customer.  Most accounting systems do not provide this level of resolution.  Value Point Accounting (VPA) uses financial analysis tools to assign balance sheet items to individual products and customers.  It does not require accounting transactions or allocations.  VPA is a management accounting technique to create complete financial statements at the product unit level – call it “nano-accounting”.

We review opportunities to use value point accounting information for enterprise performance management (EPM).  These include pricing strategy, product and customer mix optimization, operating capacity decisions, cost reduction initiatives and enterprise reporting.  This course can be useful to CFOs, controllers and cost accountants who provide profitability information to operating management.


Learning Objectives
  • Contrast the finance view versus accounting view of product and customer profitability and evaluate risks of relying on gross profit alone.
  • Introduce the concept of Value Point Accounting that focuses on the unique performance of each product sold to each customer – a value point.
  • Compute the cost of net working capital and the cost of capital on fixed assets associated with each value point.
  • Construct complete financial statements and the economic profit for each value point.
  • Explore uses of value point accounting information to challenge competitors and improve operating decisions.
  • Identify industries where value point accounting is most effective.
Last updated/reviewed: August 18, 2023
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5 Reviews (19 ratings)


Member's Profile
I didn't know what to expect for this course going into it, and was completely new material to me so the information felt dense but the instructor was good at clarifying points and kept the right pace to allow it to soak in.

Member's Profile
Very interesting topic that was new to me. Presentation was complete. I did need to go back and re-listen to a few spots. Definitely not for non-finance people.

Anonymous Author
Very useful course that helps give a different perspective as a generalist in banking I do work on a lot of companies that would benefit from Value Point Accounting.

Member's Profile
This is a deep dive into finance class and we really need 3 hours/cpe to maximize the value.

Member's Profile
Tough info to grasp at some points. But interesting.

Course Complexity: Advanced

Prerequisite: Experience with finance and Cost Accounting


Advanced Preparation: None


Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
Course Syllabus
Value Point Accounting
  Value Point Accounting Concepts 9:36
  Unit Cost of Capital: Net Working Capital 7:38
  Unit Cost of Capital: Fixed Assets 14:11
  Value Point Financial Statements5:19
  Decision Making with Value Point Information14:59
Continuous Play
  Determining the Cost of Capital on Products and Customers58:48
  Slides: Cost of Capital on Products and CustomersPDF
  Determining Cost of Capital on Products and Customers Glossary/IndexPDF