Professional Documents
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Chapter 1 Evolution of Management Accounting
Chapter 1 Evolution of Management Accounting
THE EVOLUTION OF
MANAGEMENT
ACCOUNTING
evo of MA - nsam
Financial Control
Prior to 1950
MA described as a technical activity
necessary to achieve organizational
objectives
Concerned primarily with internal
matters especially production
capacity
Mainly focused on determination of
product cost
Eg of MA techniques used LIFO &
FIFO stock
valuation methods,
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STAGE 2:
Information For
Management Planning and
Control
1950 - 1964
Focus more on providing
information for planning and
control purposes
Eg. Marginal costing, CVP
analysis and responsibility
accounting
Management control were
oriented
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STAGE 3:
Reduction of Waste of
Resources in Business Process
1965 - 1984
Global competition was very stiff &
companies worldwide looking for ways to
minimise waste & improving their value
added activities
More process analysis made together with
cost management efforts
Eg. JIT & ABC
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STAGE 4:
CREATION OF VALUE
THROUGH EFFECTIVE
RESOURCE USE
1985 to date
Focus on enhancing the creation of
value through resources
Tried to identify factors/drivers that
could potentially increase shareholders
value & eliminate non-value added
activities
Eg. TQM, ABM & Re-engineering
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RELEVANCE LOSS OF MA IN
MODERN BUSINESS
ENVIRONMENT
(Kaplan & Johnson, 1987)
evo of MA - nsam
Relevance
lost
is an overview of the
evolution of
management accounting
in American business,
from textile mills in the
1880s and the giant
railroad, steel, and retail
corporations, to today's
environment of global
competition and
computer-automated
manufacturers.
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MA Relevant Lost:
Four criticisms by Johnson & Kaplan
Limited technical developments within MA
practices despite major changes occurred in
manufacturing technology
MA information was found to be historical, less
timely and too aggregated
The accounting academics failed to innovate &
address the issues of the practice in their
teaching
The development on MA had slowed down ,
causing MA to lose its relevance in the new
millennium
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ORGANISATIONAL
CHANGE
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CHANGES IN
MA CONCEPTS
& PRACTICES
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