Debate on Changing Nature of Management Accounting
Debate on Changing Nature of Management Accounting

Debate on Changing Nature of Management Accounting

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  • Pages: 5 (1254 words)
  • Published: August 10, 2017
  • Type: Case Analysis
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In the last few years, Johnson and Kaplan who are accountancy experts have debated over the extent management accounting is changing. They argued that management accounting it had not changed since the early twenties century as well as it had lost its importance for the purpose of informing manager's decisions. Furthermore, the environment in which management accounting is exercised has changed with progress in information technology, more competitive markets, different organisational structures and new management operations.Since the publication of Johnson and Kaplan various new accounting techniques have been developed, such as strategic management accounting and activity based costing.

Where these new modern accounting techniques have not been widely used as it is shown in many surveys. This study emphasize on functions and expectations of these "hybrid" accountants who increasingly become part of the management team within a business

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process, and project implications for the professional accounting bodies and its members.This project was based at Manchester University (UK) and consisted of a questionnaire survey, a field study of 12 companies and 8 long term case studies. The project highlighted on two objects. Firstly, discovering whether management accounting has been too slow to change notwithstanding the fast changing organisational and technological environment recently. Secondly, spotlight on the new so-called "hybrid" management accountant.

The authors state that There were some external factors have been claimed by managers and accounting directors to influence management accounting to change. Firstly, the global competition of the economic state of the 1990s. The extent to which the claims of increased competition, rather than effects from the economic circumstance, which that is accountant and managers' conception and how they can observe the economic climate is

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actual. If it does matter to increase the competition and the focusing on consumers, that can be done by just rhetoric. Secondly, the advance in information technology which is the most important factor. Computers have dominated organisations' work one of the reasons for that is vast store ability they have and these data stored can be anglicised in many different ways.

Furthermore, the changed of organisations' structure which happened as result of economic effects. These factors shaped management to change in many ways.According to the authors, there been advances in information technology in last two decades. One of these forward movements is the progress of data-base technologies which supply the capacity to store a huge amount of information in accessible ways. Furthermore, the current database can analyse information in different ways. Information system that meets the needs of the various users can be easily designed.

In addition, the managers and most of people in the organisation have PCs on their own desks. They use them to access the information they need.A result of these technological developments for management accounting is what has been called elsewhere, the decentring of accounting knowledge. Financial information for instance, budgets, variances and actuals are all now available at several levels in many organisations. Accounting information is in companies which have not installed one of the new integrated information systems.

That means, inside each part of a business there is a need for a person who understand accounting information. What has been seen during the study was there were people called "pseudo-accountants" who have accounting knowledge. Therefore, the number of people who have accounting knowledge in each department has increased. This

decentring of accounting knowledge is the consequence of "pseudo-accountants" who educate other people in the organisation.The writers note that in several companies the management accountant would be notionally a member of the centralized accounting function but out in the field.

These accountants were esteemed as important because of there links to the centralized accounting function which means that these accountants' knowledge of interactions with other parts of the business. Essentially, management accountants could look outwards from a specific area of activity to the business more generally.From the companies which the writers have visited a further issue that appeared, the role of the budgets has changed. The budgets are being seen as foreword.

Management accountants can forecast the next financial period from the current budget. This is especially important because whereas accountants usually associate with budgets, managers identify from forecasts. Forecasts usually need significant inputs from signals department and functions, as they are the only people who have the essential detailed knowledge.Additional finding from the project is the change from what may be designated a "financial accounting mentality" to "commercial orientation". Commercial orientation defines that it is the business capacity to continue to earn profits in future periods rather than looking to earn a profits in the current period. This hints a strategic observe and managing the capacity to generate profits.

In many companies which the researchers visited during the study, there are strategies are being used a range of performance indicators in most companies. These companies have more strategic focus guiding to the use of a variety of using non-financial measures of performance such as customer satisfaction. Management accountants are required an extensive understanding of business

and it operations. As a result of that management accountants have to bring wide view of the business expressed in the performance indicators which one of management accountants responsibilities.Many companies became able to run without having accountants who have pure accounting qualification.

The authors outlined that as changing nature of the role of management accounting, they explored possible entailments for accountants and the professional accounting bodies. A commencing point, it can be stated that there are both opportunities and threats. In one suit survey, a Britain based manufacturer of health care merchandises, the number of workers in the accounting function declined in the period of time 1990 to 97 from great hundred to 60. Such reductions are largely an effect of advances in info engineering.The role of Management accounting has changed since "hybrid" emerged accountants in most organisations who has many qualities such as, Willing and be able to be team member, broad performance/interpretation skills, integration of different understandings and proactive in strategic matters.

"A hybrid accountant is someone who has both accounting knowledge and an in depth understanding of the operating functions or commercial processes of the business". The organisations had changed from a functionally organised business to a process based descriptor of organisation. If possible each land site was responsible for the whole its actions from the receipt of an order to bringing of the final product and whereby, each unit. Under this new structure there is a process leader who is for all these activities, together with the associated back up functions which are an integral component part of the process.

The writers have seen various examples in their case studies. At one

extreme there were accountants, who were superior at producing and analysing the figures, but they could not associate them to the commerce, and consequently they were not kept in possession. In particular, management accountants need to associate the accounting and financial info to the wider info flowing within the organisation, including strategic info, and to identify the limitations and the potential of management accounting.the writers started with issue which has been claimed by Kaplan and Jonson that management accounting had lost relevance, which the tool that the managers use to make decision. The writers indicated the emergence of hybrid accountants which have developed the organisations. They are to team member in department and educate the others financial issues.

One more issue the study has found that organisations provide continuing education activities which preparing their future and current members for changing role of management accounting.

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