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MANAGEMENT ACCOUNTING - Essay Example

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MANAGEMENT ACCOUNTING

external and internal factors. These factors have redefined how management practices or functions are performed across business organizations. In the writings by Burgstahler et al. (2007), they stated that the transformations have largely affected the decision making process since there is a change in the management structure, which has integrated new roles as well as position holders. In addition, technology is also been increasingly applied in performing management functions. Despite the continuous transformation in the field of management, the constant variable has been the fact that accounting figures have consistently played a key role in the decision making process or rather they have consistently been used to decide the direction that the company should take. The strong reliance on accounting figures to perform management functions has led to the development of management accounting or control systems that were specifically designed to help the management of business organizations in the process of control, product costing and evaluation of management’s performance. However, in a seminal article, published by Johnson and Kaplan (1987) they both argued that management accounting systems had lost their relevance since they were inadequate for the modern accounting environment. In particular, they succinctly summarized the inadequacy of management account systems to cope with the demands of modern management by stating the information they generated was “too late, too aggregated, and too distorted to be relevant for managers’ planning and control decisions (Ezzamel et al. 1990). This present study mainly seeks to discuss the above statement in relation to today’s environment. It will begin with a literature review of the main topic of discussion and even a review on Johnson and Kaplan’s criticisms. Secondly, it will state the methodology that was applied in collected secondary data that were used in this study. In the third part before concluding, the study will conduct a critical analysis on the Johnson and Kaplan’s argument. 2.0 Literature review 2.1 Accounting With reference to the writings by Alkaraan and Northcott (2006), they stated that accounting as a practice focuses on recording, measuring, and communicating financial facts to concerned parties who use the facts for varying reasons. Roslender and Hart (2003) noted that in the present business environment, accounting largely focuses on the preparation of accounting reports and less on bookkeeping, which has been reduced to fairly a routine process because of the increased computerization and introduction of more effective systems of internal control. The users and uses of ...Show more

Summary

A Discussion on Johnson and Kaplan’s Relevance Lost Abstract This present paper is a research paper that looks at the criticisms, which were made by Johnson and Kaplan (1987) in regards to management accounting/ control systems. In particular, the criticism stated that the MA systems had lost their relevance since they were “too late, too aggregated, and too distorted to be relevant for managers’ planning and control decisions.” However, this study has substantially established that MA systems regained back their relevance largely because they have been re-developed to ensure that they give real time information that can be used for effective decision-making…
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