(Delft University of Technology)
Welcome to managerialaccounting.org. This website surveys the development of managerial accounting and explains the most important managerial accounting terms and concepts.
What is Managerial Accounting?
· Performance reports:
These reports often consist of comparisons of budgets with actual results. The deviations of actual results from budget are called variances (Horngren and Foster, 1987)
· Other information which assist managers in their planning and control activities.
Examples are information on revenues of an organization ’ s products and services, sales back logs, unit quantities and demands on capacity resources (Kaplan and Atkinson, 1989).
Managerial Accounting Practices
Traditional managerial accounting systems are mainly designed to measure the efficiency of internal processes. In the 1980 ’ s, traditional managerial accounting practitioners were heavily critized on the grounds that their practices had changed little over the preceding 60 years, despite radical changes in the business environment. For more information on traditional managerial accounting practices see the Traditional Managerial Accounting page .
The last decades new managerial accounting practices such as activity-based-costing, the balanced scorecard and bottleneck accounting were developped:
Unlike traditional managerial accounting, activity-based-costing deemphasizes direct labor or raw material as cost drivers and concentrates instead on activities (e.g. the number of production runs per month) that drive costs. Activity-based costing gives the management of an organization a clear picture of the cost drivers and the opportunities to reduce costs (Kaplan and Norton, 2001). For more information on activity based costing, see the Activity Based Costing page .
Traditionally, management accountants ’ principal performance report was variance analysis, which is a systematic approach to the comparison of the actual and budgeted costs and revenues during a production period. While some form of variance analysis is still used by most manufacturing firms, it nowadays tends
to be used in conjunction with other performance reports such as the balanced scorecard. A balanced scorecard is a set of financial measures, operational measures on customer satisfaction, internal processes and the organization's innovation and improvement activities (Kaplan and Norton, 1992). Kaplan and Norton also argue that the balanced scorecard can be used as a strategic management system which identifies the value drivers of an organization's strategy and a management system to align the organization to the strategy (Kaplan and Norton, 2001). For more information on the balanced scorecard, see the Balanced Scorecard page .
In a traditional variance analysis, managerial accountants compare the actual sales with the budgeted sales. A traditional variance analysis however does not point out which bottleneck coursed an unfavorable difference between actual and budgeted sales (see also Veltman, 2011). With bottleneck accounting however, managerial accountants are able to determine:
- the bottlenecks of an organization and;
- how much money was lost because of each bottleneck.
For more information on bottleneck accounting see the Bottleneck Accounting page.
- Garrison, R. H. P. E. Noreen, 'Managerial Accounting', Irwin McGraw Hill, 1999
- Horngren, C. T. and G. Foster, 'Cost Accounting, A Managerial Emphasis', Prentice-Hall, Inc. 1987
- Johnson, H. T. and R. S. Kaplan, 'Relevance Lost: The Rise and Fall of Management Accounting', Harvard Business School Press, 1987.
- Kaplan, R.S. and A. A. Atkinson, ‘ Advanced Management Accounting ’. Prentice-Hall International Inc. 1989
- Kaplan, R. S. D. P. Norton, 'The Balanced Scorecard - Measures that Drive Performance', Harvard Business Review, January - February 1992.
- Kaplan, R. S. D. P. Norton, 'The Strategy Focused Organization', 2001, Harvard Business School Publishing Corporation.
- Solomons, D. 'Historical Development of Costing', Studies in Costing, Sweet & Maxwell, 1952, pp. 1-51.Source: managerialaccounting.org