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Finance & Accounting
Pages 18 (4518 words)
Finance and Accounting: Management Accounting Name: Course Name: Instructor: Date: Question 4: Critically evaluate the contribution of contingency theory in helping us to understand how accounting and budgets can and should be utilized to address the problem of management control…
The theory aims at reflecting management accounting system as dependent on factors that crop up from time to time. This theory brings details of the factors which rise up and affect a management accounting system. According to this contingency theory, the contingent factors affecting a management accounting system are unique to each organisation. Organisations vary from one another in terms of operations thus the difference in the form of adoption, functioning and sophistication of a system. This means that each company will have a management accounting system which is specific to its form. This explains why we do not have a globally adopted accounting system. Contingency theory has made bold steps in helping us understand how accounting and budgets can and should be used to deal with the issue of management control. The theory basically supports the handling of accounting and budgets in a way which recognizes related changes which might occur in the company (Sharma, 2009). The contingency theory is usually very important in ensuring that the management accounting system in a company is in sync with the prevailing factors at a given time. The efforts by this theory have been successful through the manipulation of the factors that affect a management accounting system among other factors. ...
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