"If management accountants are to remain useful to the organisations within they work, they need to keep current with changes in management practices" (Horngern, 2002) Management accounting was evolved from financial accounting in the 19th century

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“If management accountants are to remain useful to the organisations within they work, they need to keep current with changes in management practices” (Horngern, 2002)

Management accounting was evolved from financial accounting in the 19th century, due to the escalated need for more detailed and timelier information for stock control, product costing and decisions affecting the future. The main aim of it was to “provide timely and accurate information which can help create value” (Atkinson et al). I am going to investigate how management accounting has developed over time and whether it still provides a useful tool to managers. Accounting is now facing new challenges, “business people must increasingly recognise that the challenge now is to help to deliver simultaneously economic prosperity, environmental quality and social equity” (Elkington, 1998), which is causing mangers to re-evaluate the practises that are currently conducted.

Traditionally management accounting systems were concerned with providing financial information. However in respond to the changing environment an immense emphasis is now on gathering and reporting non-financial quantitative and qualitative information. This resulted in a movement; treating financial figures as part of a broader set of measures instead of foundations of the practise.

In the 1950’s efforts were made to calculate the total costs involved in producing one unit of X. This emphasised the importance of absorption costing and the accurate apportionment of costs betweens overheads, labour etc.

Then in the 1960s the main issues related to planning and control.  No method existed that could be applied to every situation. This paved the way for a user orientated approach.  A distinction was made between actual and opportunity costs.  The main problem with this was the cost of obtaining information wasn’t taken into consideration.  This was eventually recognised and integrated into the accounting procedures.

The main reasons why changes in practices have occurred are due to computer software allowing data to be used more effectively e.g. projecting future performance from past performance. External factors are now being considered to aid budgets, forecasts, share holders now focus heavily on future predictions instead of past performance.  Information systems have evolved to an extent where they meet the criteria required by management accountants.

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In the 1980’s changes in the business environment led to a ‘rethink’ about the existing management accounting practices.

In some cases measuring a company performance with the use of traditional methods can be limiting.

  1. The performance measurements approve by traditional management accounting may be of limited usefulness in certain circumstances.
  2. Management account will use limited information for decision make and accounts will not be able to think ‘outside of the box’ however if wider information is provided then a bigger picture can be built up instead of the company just mapping out the short term plans
  3. ...

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