Management Accounting: Past, Present, and Future Trends Analysis

This essay provides a comprehensive overview of the evolution of management accounting, tracing its development from the early 19th century to the present day and offering insights into its future trajectory. The essay examines the key shifts in management accounting practices, including the transition from simple cost accounting to more sophisticated techniques incorporating economic and business insights. It explores the impact of technological advancements and global economic changes on the field, highlighting the emergence of new methods such as target costing, benchmarking, and value-added management. The essay analyzes the evolution of management accounting techniques, including the shift from financial accounting to planning and control, and the incorporation of economic perspectives. It concludes by emphasizing the importance of management accounting as a crucial tool for businesses in making informed decisions and remaining competitive in a dynamic global environment, and its future as a cognitive branch of accounting that integrates financial statistics, economic insights, and managerial perspectives. The essay references key developments, the impact of technology, and the constant changes and innovations in the field, offering a valuable resource for students studying finance and accounting.

Running head: PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
Past, Present and Future of Management Accounting
Name of the Student
Name of the University
Author Note

1PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
Introduction
Management accounting, is one genre of accounting, which unlike financial accounting,
deals with the provision of timely and precise financial information useful for the purpose of
decision making in business. The need for management accounting was felt with the change in
the dynamics of the businesses and commercial activities, which contributed to their
complexities. Though having its base in the early nineteenth century, accoeding to many
researchers, the management accounting, as a profession has significantly changed over time,
taking into account its flaws, criticism and needs of the situations. The essay tries to see the
course of evolution of management accounting as a profession, over the years, in a global
framework (Kaplan, Atkinson & Morris, 1998).
Evolution of management accounting
Management Accounting before 1950:
The notion of management accounting before 1950, was that of a simple technical process which
was mainly beneficial for the purpose of fulfilling the organizational objectives of the
commercial enterprise. This mainly dealt with the determination of the cost of production of a
business, as the business activities at that point of time were not much complicated. As the costs
of production were identifiable easily, management accounting resembled the format of cost
accounting broadly.
A more robust management accounting system appeared in the nineteenth century in the United
States of America. This type of accounting was an amalgamation of simple as well as
complicated methods of accounting. These new frameworks, also including cost accounting,
intended to keep a tab on the outflow of resources and in maintaining a timely and accurate

2PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
report for the purpose of management of the business activities and also for helping future
speculations.
Management accounting in the nineteenth century also saw a few other progress which helped it
to shape up more efficiently. With the emphasis on the productivity and efficiency of utilization
of the capital resources, the need was felt to account for the performance of such resources in the
commercial activities. This gave rise to the Du Pont procedure for management accounting,
which had the provision to evaluate how well a firm can utilize the capital assets which are
present with it. This method seemed to be immensely beneficial for the purpose of making the
investment decisions in the commercial activities.
Non accounting information usage, as a part of this type of accounting also came to existence in
the first half of that century itself, which indirectly involved an economic perspective as well.
This method involved the studying and analyzing of the financial behaviors of the different
agents who are participating in the business activities, both on the demand side as well as on the
supply side.
From 1950 till now
Though before 1950, the management accounting was a simpler process, slowly evolving and
showing characteristics which were quite unique and different from the usual accounting
behavior, the focus of this genre shifted massively from just financial accounting to dealing with
information in the aspects of planning and controlling the commercial activities of a firm. The
activities were getting slowly molded towards the control of the internal administrations and
planning for the future business ventures.

3PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
With the management accounting techniques becoming more of a problem detecting and solving
one, in case of irregularities and fluctuations in the business activities, newer methods went on
evolving in this field and nearly 30 methods came into existence by the end of the 1980s. In
1950s the methods followed were Cusum charts and transfer pricing, which led its way to
technical methods using computers by the end of 1960s. Decision tree and Zero budgeting also
came into existence in this period. Economic insights were included in this genre fro, 1970s with
the increasing complexities and cognitive nature of the commercial enterprises and the expansion
of their domain. Portfolio management and techniques like just in time scheduling also came into
existence at this point of time (Parker, 2002).
The 1980s saw few global economic turmoil like the oil price increase and a world wide
recession. The period was also marked by a huge increase in competition in the commercial
environment in the international framework. The commercial enterprises needed a far more
comprehensive method of management accounting and this need gave rise to more robust forms
of management accounting processes and the cost accounting and management techniques also
saw huge transformations. The primary challenge for the management accountants became the
proper usage of these techniques so as to find out the information which would be beneficial for
the businesses to stay ahead of their competitors in the global business framework. Techniques
like targets costing, Benchmarking and the value added type of management also came into
existence during this period (Langfield-Smith, 2008).
From the beginning of the 1990s, the global business framework was subjected to uncertainties
and unanticipated phenomena which led to the need of taking abrupt decisions on part of the
commercial enterprises. The expansion of internet and technological innovations played a huge
role in the change in the dynamics of the business activities in the world wide framework.

4PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
Technology also cam e into use in the management accounting field with the introduction of
checking and monitoring mechanisms of customer and shareholder values and other innovations
which are used in the current day management accounting.
Future
Management Accounting as a profession has been growing for the last few decades,
though the concept has been there since the early nineteenth century. With the growing
complexities in business, diversifying specializations and newer innovations in the technology,
the needs of the commercial enterprises are also changing in order to stay competitive. In this
context, management accounting comes as a cognitive branch of accounting, which not only
takes into account the financial statistics, but also incorporates economic and business insights in
it to help in making the decision making process easier for the managers. As can be seen from
the recent developments, the evolution of the techniques in this field in the last two decades have
been much higher than in the two decades prior to that. The dynamics and the complexities in the
business activities are also leading to constant change and innovations in the firld of management
accounting as a profession (Waweru, 2010)
Conclusion
It can be concluded from the above discussion that management accounting, as a
profession, has had its share of ups and downs and has undergone a huge amount of changes in
all of its dimensions. The management accountants over time came across different types of
frauds and other hurdles, which in its turn, led them to proceed to find out newer and more
innovative way outs, thereby progressing successfully. Technology also, over the years, changed
and consistently had impacts on the method of management accounting, in a global framework

5PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
and is contributing significantly in opening up new arenas for venturing in near future and
management accounting, with the features of accounting, economics and managerial insights in
it, poses as a robust business tool for the commercial enterprises in future.

6PAST, PRESENT AND FUTURE OF MANAGEMENT ACCOUNTING
References
Kaplan, R. S., Atkinson, A. A., & Morris, D. J. (1998). Advanced management accounting (Vol.
3). Upper Saddle River, NJ: Prentice Hall.
Langfield-Smith, K. (2008). Strategic management accounting: how far have we come in 25
years?. Accounting, Auditing & Accountability Journal, 21(2), 204-228.
Parker, L. D. (2002). Reinventing the management accountant. Transcript of CIMA address
delivered at Glasgow University, 15.
Waweru, N. M. (2010). The origin and evolution of management accounting: a review of the
theoretical framework. Problems and Perspectives in Management, 8(3), 165-182.