• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

It has been suggested that the so-called traditional systems should be replaced by new approaches. Factors Shaping Management Accounting Change However, before describing our observations on the changing nature

Extracts from this document...


1) Management accounting change and stability: Loosely coupled rules and routines in action Kari Lukka. 2) Management accounting change. John Burns and Juhani Vaivio. CONTENTS: * Introduction * Management Accounting Defined * Management Accounting changes for the 1990s * New element to be consideration in management accounting * Main changes is Activity Based Costing (ABC) * Traditional costing today * Conclusion Introduction: During the last years we have seen innovative practices and new methods in the field of management accounting. For different subject areas it was advocated that existing concepts and techniques ware obsolete and create dysfunctional behaviour. It has been suggested that the so-called traditional systems should be replaced by new approaches. Factors Shaping Management Accounting Change However, before describing our observations on the changing nature of management accounting and the changing roles of an accountant. In capital budgeting, there is a call for strategic investment appraisal instead of traditional discounted cash flow methods. In cost accounting, activity based costing is becoming popular. Also, new concepts and theories are being sought for ensuring performance. Management Accounting Defined: Management Accounting is an integral part of management concerned with identifying, presenting and interpreting information used for: * Formulating strategy * Planning and controlling activities * Decision tacking * Optimising the use of recourses * Disclosure to shareholder and other external to the entity * Disclosure to employees * Safeguarding assets. ...read more.


4. Increase flexibility: The same equipment will handle both current high volume models and discontinued models; machines can serve as backups for each other; and they can easily accommodate product changes. 5. Shorter lead time: The new technology allows the company to respond to customer demand more quickly. 6. Gaining experience with the technology: This will enable managers and employment to be in a better position to deal with any future technological advances which may drastically alter the market situation. Main Changes is Activity Based Costing (ABC): Traditionally cost accountants had arbitrarily added a broad percentage onto the direct costs to allow for the indirect costs. In a business organization, Activity-based costing (ABC) is a method of allocating costs to products and services. It is generally used as a tool for planning and control. This is a necessary tool for doing value chain analysis. Definition "A method of measuring the cost and performance of activities and cost objects. Assigns cost to activities based on their use of resources and assigns cost to cost objects based on their use of activities. ABC recognizes the causal relationship of cost drivers to activities." Process description of the first phase of the ABC-process: The first phase of the ABC-process of the day-surgery unit started in 2003 and ended in spring 2004. ...read more.


These include sales, marketing, advertising and administrative functions. In many manufacturing and non manufacturing companies, these costs represent a substantial part of the total value chain cost. The management cost system should address these issues as well. Conclusion: New Management Accounting techniques have been developed such as activity-based costing (ABC) and strategic management accounting. However, such so-called 'modern' techniques are not being used as widely as their advocates might have expected. For example, various surveys indicate that ABC is only used by between 20% and 30% of companies (e.g., Innes and Mitchell, 1995). Whereas traditional management accounting techniques continue to be used widely. However, rather than change being necessarily in the type of management accounting techniques adopted, it seems to be more about the manner through which management accounting, including many traditional techniques, is being used. Whilst it is difficult to disagree with the findings of surveys that, at a superficial level, traditional management accounting techniques continue to be used, these surveys fail to identify changes in the way that traditional accounting techniques are now used in practice. The Changing Nature of Management Accounting, there have been considerable advances in information technology in recent years. One of the most important, apart from the speed and capacity of modern systems, has been the development of data-base technologies which provide the ability to store vast amounts of information in easily accessible ways. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. In this assignment I am opening a tuck shop in the school grounds and ...

    6000 customer to break even 37p- 17p 20p Break even Working out stage #5 Fixed costs Rent = �1950 per anum Bills = �210.60 per anum Total fixed cost = �2160.60 anum Variable costs Stock (crisp, dinks, and chocolates) Crisps = 25p Drinks = 30p Chocolates = 25p Total variable

  2. 'Historic cost accounting is the worst possible accounting convention, until one considers the alternatives.'

    One main strength of CPPA is its ease of application. The method relies upon data that would already be available under historical cost accounting, thus it saves the cost and effort to revaluate the current value of the various non-monetary assets.

  1. Comsat case

    * To calculate the cost of debt, Exhibit 4 was used, and the average of the Aa utility bonds from 1967-1974 is the best estimate the cost of debt for Comsat. * To calculate the equity risk premium, the data from the SBBI (Stocks, Bonds, Bills & Inflation)

  2. Accounting Concepts and Conventions

    Sales will be shown in the profit and loss account at their full value of �100,000 but the provision for bad debts will be charged at �6,000. Due to the uncertainty of sales not being realised, the prudence concept suggests that the �6,000 should not be included for the profit of the year.

  1. This report has been produced as evidence for Unit 9 - 'Financial Services' - ...

    Ways of assessing the performance of Shares There four main ways assign the performance of shares these are the following: 1. weather the shares price increases or decreases 2. The yield (dividend yield) e.g. the current yield on an Abbey National share is 6.8%, this shown the percentage return a share holder gets on their shares.

  2. The Purpose of Keeping Accurate Accounts

    3. Error reduction: Once programmed, the computer is virtually error - free in both processing and performing mathematical calculations. Manual system are much more prone to human error. 4. Automatic posting: Once data have been entered all posting is performed automatically by the computer.

  1. Financial Analysis of Matalan PLC

    Changing it to lower of cost or net realisable value' gives a more precise definition to the terms used. Difficulties: One difficulty involved in the estimation of net realisable value is the last phrase in the definition - 'less the anticipated costs that would be incurred in its disposal.'

  2. Business systems Babatunde Onaola - Identify and use planning, control methods in conjunction with ...

    Rent and executive salaries are two examples. The total variable cost, on the other hand, is the sum of all the expenses that fluctuate directly with the level of activity or sales. Cost of materials to produce a product or purchases of items for resale are two variable costs.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work