History and Evolution of Managerial Accounting

This document explores the history and evolution of managerial accounting, from its early usage in the 19th century to its modern applications. It discusses the changes in accounting practices and the role of managerial accountants in financial planning and control. The document also highlights the shift in focus from financial perspective to concepts like customer satisfaction, value creation, and internal processes.

Running head: HSTORY AND EVOLUTION OF MANAGERIAL ACCOUNTING
History and Evolution of Managerial Accounting
Name of the Student
Name of the University
Author Note

1HISTORY AND EVOLUTION OF MANAGERIAL ACCOUNTING
Table of Contents
History of Managerial Accounting..............................................................................................2
Evolution......................................................................................................................................2
References....................................................................................................................................4

2HISTORY AND EVOLUTION OF MANAGERIAL ACCOUNTING
History of Managerial Accounting
Management accounting has undergone many changes ever since the beginning of its
usage by companies in helping them with their businesses. Initially, in the 19th century and the
early 20th century, it remained popular as the accounting for process and its focus lied in
calculating the operating costs and the efficiency of the production processes (Kamal, 2015). In
these cases, the costs were calculated on an overall basis. They were not allocated to specific
items that were responsible for the costs. However, in the 20th century, the concept of matching
items with their costs became prominent and the accountants began to identify the specific costs
with the items for which they were incurred. This provided the management with an idea of cost
absorption and its usage in gaining financial control. The role of management accounting until
the middle of the 20th century was limited to calculating the costs and reducing them to benefit
the organization.
Evolution
However, the scope of the managerial accountant began to evolve since the middle of the
20th century. Rather than merely accounting for costs incurred and matching them with their
respective items, they began to identify the rate at which these costs were absorbed. As most of
the production processes at that time were manufacturing intensive, the absorption costing was
extremely helpful in providing relevant information to the management about financial planning
and control (Fleischman, Tyson & Oldroyd, 2017). However, during the 1980s, when computer
based businesses began to gain popularity and more knowledge could be accrued about the costs,
new concepts like ABC costing, Target Costing, Just-In-Time purchases and waste reduction
began to be used more frequently (Appelbaum et al., 2017). There were no significant
innovations until the 90s decade. At this point, organizations began to identify the importance of

3HISTORY AND EVOLUTION OF MANAGERIAL ACCOUNTING
creation of value and hence began to use new techniques like Balanced Scorecard, Economic
Value Added and creation of customer value. The focus shifted from only considering the
financial perspective to accounting for concepts like customer satisfaction, value creation,
internal processes and their effectiveness and the learning approach in formulating new
procedures and policies. It can be suggested that over the years, managerial accounting has
become more flexible and is useful in providing the organizations with the information required
by them and in suggesting measures for improvement.

4HISTORY AND EVOLUTION OF MANAGERIAL ACCOUNTING
References
Appelbaum, D., Kogan, A., Vasarhelyi, M., & Yan, Z. (2017). Impact of business analytics and
enterprise systems on managerial accounting. International Journal of Accounting
Information Systems, 25, 29-44.
Fleischman, R. K., Tyson, T. N., & Oldroyd, D. (2017). Accounting history. The Routledge
Companion to Critical Accounting.
Kamal, S. (2015). Historical evolution of management accounting. The cost and
management, 43(4), 12-19.