MANAGEMENT ACCOUNTING

Management Accounting

Part 1

Old and New Management Accounting

Introduction

Managerial accounting or management accounting is concerned with the use or with the provision of accounting information for the managers with in an organizational framework. This is the accounting which provides them with the basis to make informed business decisions (Clarke, 1995 pp 46). It allows the mangers to be better equipped for the control and management function. As compared to financial accountancy the management accounting is more of into forward decision making instead of historical. They are the models which are based on degree of abstraction for supporting deacons generically instead of case to case base. Intended and designed to be used by managers within the organization for the purpose of forecasting the production and manufacturing of goods (Johnson & Kaplan , 1987, pp 39). These are not meant to be used by the shareholders, regulatory authorities and creditors of the company. Management accounting is mostly kept secret due to the margins and production utilization etc (Kaplan , 1990 pp 54). These are computed according to the needs of the managers and are not based on the general financial accounting.

Several criticisms have been made on the new management accounting as compared to the old management accounting (Bruns & Kaplan, 1987 Pp 88). Thus in this report we are going to highlight the criticism on the management accounting and will also suggest how they are viewed in the world class manufacturing context.

Discussion

Management accounting has gone through a revolutionary change in the past few decades. These are due to the changing condition of the world as well as the changing needs of the business (Hansen & Mowen, 2000 pp 106). This has resulted in several changes in the field of management accounting. The resulting accounting developments are discussed are differentiated in three broad areas. These grouping are as follow,

Management accounting failing to meet the company's management accounting practice progress towards a world class manufacturing

In multi goods companies the produce cost are wrong due to the overhead absorption methods employed.

In making the Strategic decisions, the inner orientation of accounting is very contracted.

World Class manufacturing

The concept of world class manufacturing is that high quality product should reach the end customers in a very short period. These goods should provide high quality performance to its ends customers and should be able to satisfy it (Horngren 1981 Pp 66). To achieve the high quality that is based on the WCM performance many of the companies has invested in advanced mechanization of the manufacturing technology. The end result of these technologies is that better design, production flexibility and reliability is achieved in overall aspect of manufacturing.

Activity Based costing

The 2nd criticism of the management accounting is related to the method used that is the manufacturing overhead are assign to the product. The old method of costing used to assign the production overhead to the product by making use of volume base recovery. This is accepted if a large proportion of overhead are volume ...