Activity Based Costing (ABC) is a way of understanding the actual cost of work by tracing resources through the activities and tasks that consume them.
Traditional accounting can show what type of expenditure occurred, but this does not necessarily reveal what work consumed the resources, why that work was necessary, which capability it supported, or where the resulting benefit or burden fell. ABC connects financial information with operational reality.
In the ASF framework, this relationship is expressed as L3 Capability → Activity → Task Type → Task → Actual Cost → Cost Object. This connects planned work with what actually occurred and enables cost to be understood alongside capability, data, performance and consequence.
ABC therefore provides more than a mechanism for allocating costs. Used well, it helps an organisation understand what work it funded, what work actually happened, what resources were consumed, where the cost fell, and what consequence followed.