Changes in Management Accountig Essay - 1916 Words



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Changes in Management Accountig

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Text Preview The field of management accounting is often described as the field of undergoing changes. ( Goretzki Strauss Weber 2013)In today’s world, business environment requires the stakeholders to make decisions as fast as possible. They have to follow changes not only in internal company situation but also changes in technology, science and business world. Management accounting studies proved that having the right managerial tools in place not only helps improving financial results but is also crucial for improvement in on-going performance, control process and communication. Nowadays the traditional management accounting is required to be replaced by new techniques which would enable to add more value to control and decision making in management accounting field.( Goretzki Strauss Weber 2013). As the result the number of new management accounting techniques have been developed.( Garg Ghosh Hudick Nowacki 2003) .

The rapid changes in management accounting were seen at the beginning of 20th century. There were needed as there were several issues associated with traditional accounting. There was a need for new techniques which would meet the needs of new business environment. (Pierce and O’Dea 1998). By 1980s management started identifying the costs and using budgets as a tool to recognize returns on different levels of investment. There was a number of new cost management techniques introduced in this period, precise methods to measure costs and managerial performance. Management accounting tools were also found to enable data interpretation and by this process, advise management. (Waldron). The most important and widely used techniques introduced in this period are activity-based cost management, the Balanced Scorecard, benchmarking, life cycle costing, target costing, economic value added measures and strategic cost management. Other managerial tools such as Kaizen, Total Quality Management, Business Process Reengineering and Six Sigma were developed later on in this period and are the most innovative tools for management in management accounting field. (mankies)

Nowadays ABC and non-financial performance measurements can be found in all textbook about management accounting. Companies find a lot of benefits when using ABC method, and in general this method is considered a crucial tool to manage the costs apportion for many companies. (monkeys) Balanced Scorecards techniques have proved to increase profitability. Economic value added and other advanced management accounting practice techniques used to measure managerial performance, report positive results. New techniques as Kaizen, Total Quality Management, Business Process Reengineering and Six Sigma has been found extremely helpful in order to price the product and improve the overall production process management in the fast changing environment and markets of grooving competitions ( mankies).

However if we analyze the application of this method in practice, results are disappointing. Szendi and Elmore (1993) research shows that most of the companies would use the new management accounting practice as an additional tool to traditional accounting. However insufficient use of new methods would still indicate that management accounting never progressed from traditional ways. Moreover companies would prefer to use the traditional methods as a simple accounting structure would also enable them to generate required information by making different uses of gathered

data. (Szendi and Elmore 1993 ) Mersereau (2007) study shows that only 20 percent of companies use ABC method in practice. Numbers of firms which have applied EVA do not use it much in practice either. Most of users of balance score cards also failed to apply non- financial performance to their strategy. Therefore we should try to answer the question why, despite widely beneficial innovations in management accounting in the 1980s/90s, companies would still use traditional management... Show More

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