Management Accounting Evolution and Modern Practices Report

This report provides a comprehensive overview of management accounting, tracing its evolution since 1980 and examining its significance in modern business practices. The report delves into the historical context of management accounting, highlighting its adaptation to industrial and information age transformations. It explores the critical analysis of modern accounting techniques, emphasizing the shift in the role of management accountants from scorekeepers to strategic business partners. Practical examples of how companies like Apple and Woolsworth utilize management accounting principles, including cost management, transfer pricing, and strategic triangulation, are discussed. The report also includes a literature review and references to support the analysis, offering insights into the application of accounting strategies in real-world business scenarios. This document is contributed by a student and is available on Desklib, a platform providing AI-based study tools for students.

Advance management accounting

TABLE OF CONTENTS
Introduction................................................................................................................................3
Literature Review.......................................................................................................................3
Critical Analysis.........................................................................................................................5
Practical Examples.....................................................................................................................6
Appendix....................................................................................................................................8
References................................................................................................................................10

INTRODUCTION
In the words of Ward, (2012) management accounting is the process of making
reports and accounts of the company on time and with proper financial and statistical
information. The information that is generated by this process is of high importance as it
allows managers to make day to day and short-term decisions in an effective manner.
The present report is focused on understanding the evaluation of management
accounting since 1980 and the ways in which it became a significant part of the business
entities in Australia. It will also discuss the modern accounting practices used by companies
these days in order to increase their performance. For this aspect, case examples of Apple and
Woolsworth are also provided with some articles in order to analyze the ways in which
modern accounting is helping the companies.
LITERATURE REVIEW
The study of management accounting has been developed by considering its roles and
trend as these skills will be upcoming as a high demanding tool (Ditillo, 2012). The major
reason behind this is that there is an immense increase in demand for experts who have highly
professional skills and abilities to cope up with the dramatical change in the global economy.
It is not the very first time management accounting has changed its operation to experience
and fulfil the demands of the freshly restructured economy. In fact, as long as the industrial
revolution has been evolved management accounting has responded over the transforming
manner of the global economy, as it reshaped itself many more times (Emmanuel, 2013). The
emergence has been noticed by the 21 century when the information and consequent
economy has to drive the knowledge as a means of competitive edge. The key driver of this
significant change in the activities of the economy is taking a new way of innovation and
creativity in the management accounting and has taken it to the next level of demand for
abilities and skills in today’s world of professional accounting (Soin and Collier, 2013).
From the industrial revolution and quick improvement in the new manufacturing of 19
century, management accounting emerged (Burns, 2012). In this period, home office
separation from the facilities of production and the multiple mixing procedures altogether on
an incorporated factory carried out the system development, which was designed to estimate
the internal system efficiency (Quinn, 2014). This approach became more complex as
manufacturing took place in a broad range of ultimate products, where each product used
various resources at various rates; further, a new model was required.

This was considered as invalid it was filled and submitted by scientific management
movement (Seal, 2012). The movement aimed at improving comprehensive standards for the
procedure, time, efforts and materials were used. This will no doubt result in the development
of costing and allocating products in terms of labour used. Once again, management
accounting implemented to alter situations.
The 21st century, a 1st decade has been classified by industrial age and information age
emergence. The key drivers of this transformation were inclusive of various factors that have
appeared in the last 20 years (Hiebl, 2014). The factors were; the union of transportation,
trade and communication, due to the change in environmental concerns and precedence,
falling significance of nation-state, high demand on energy, material and food along with an
increasing population. Other factors were expanding the significance of woman as a
consumer or in politics or business, and the ever-present nature of technologies of
communication (Castells, 2014).
The consequential economy of 21st Century is manipulated with services against
manufacturing. In fact, manufacturing is actually more service driven it aims on changes,
customer satisfaction and support marketing, example, Apple (Dumitru and Matei, 2014).
The modern technology or quick speed of changes is the vital roof for the modern economy.
The global reach of the internet and its worldwide use is generating a totally new business
and changing several conventional sectors for example communication, retail and media
(Smith, 2013).
Management accounting is in its stage of immaturity. In the past, it played a minor
role in financial accounting in many of the companies, although even now it is more than a
consequence of the process of financial reporting (Bromwich and Bhimani 2005).
Conversely, last two decade events have urged the improvement in the managerial accounting
process; now it is coming to a broadly known expertise field that divides from financial
accounting (Burns and Needles, 2014). Several innovations of cost and accounting, since the
last two decades, are higher compared to the prior decades (the 1960s and 1970s). This states
that the insufficient accounting innovations of cost and accounting in the last two decades
doesn’t emerge to be an issue. In support of this view, it highlights that the 1980s and 1990s
noticed the transformation regarding the management accounting innovation and processes
(DRURY, 2013). It has come back with this examination by recommending on the last two
decades years; there is a quality supply of innovation in management accounting over the
literature. In the last 50 years, there is an observation of no new concept in the management
accounting. By taking a look at the changes of the last 50 years, certain functions even

unchanged, however now they are alleged and been moved to the room of professionalism.
The revolution is totally based on the professed management accounting process and function
(Jaques, 2017).
In the ending stage of the 20th century, there was considerable change in management styles.
The things that have changed and transformed were the issues, like technological speed or
environment (Müller, 2014). The ability to make better decisions and being an efficient
partner has also changed this dramatically.
CRITICAL ANALYSIS
According to Parker, (2012) with the changing business practices and intensifying
global competition, management theories proposed in the past are on the verge of becoming
irrelevant for contemporary business scenarios. Management accounting is the function that
gathers and provides integral accounting and statistical data to make decisions of manager
easy. Renz, (2016) stated that change in the management accounting has completely
transformed the role of management accountants. Traditionally, accountants were employed
to handle scorekeeping, playing a role of attention director and solving all the problems
related to accounts. However, with the change in working of the companies, the role of the
accountant has completely transformed to meet all the information requirements of the
uncertain business environment. Management accountants in modern companies are playing
the role of business partners as well as information analyst that has allowed them to enable an
upgrade from a centralized accounting function to become partners of managers in business
firms.
Widener, (2013) added that during the early 19th century most of the companies were
controlled by few managers as elaborated financial reports were not demanded. Then came
the 20th century which saw lots of changes in the economy and it became necessary for
companies to submit detailed financial reports to satisfy the capital markets, creditors, and tax
authorities. In today’s century, managers are under lots of pressure to not only make
decisions but also to develop plans that can allow the company to strive and sustain in this
competitive market. Burritt, (2013) said that the role of modern management accounting is to
provide different levels of management in companies with information that can allow them to
make sound decisions in order to add value to the company. It is different from traditional
accounting as previously, managers were provided with essential information in time so that
targets can be set, the cost can be minimized, standards can be developed, performance can
be monitored, etc.

Williams, (2014) studied that the advancement of information technology has
enhanced the management accounting to a very higher level. It now allows the managers to
have the availability of all kind of real-time data related to finance without waiting for an
accountant to sort it out. The new management accounting system allows the managers to
conduct different types of the accounting tasks by themselves with the help of different
accounting management software. Preparations of budgets, analysis and calculation, have
become easy with all the automated formulas and ratios.
This evolution has also brought great significant effect on the forecasting rather than
budgeting as analyzed by Burns, (2013). Management accounting considers all the business
factors nowadays and provides the analysis in such manner that managers are able to compare
them with other companies easily on every financial aspect. It has made the decision-making
faster and due to that businesses are able to grab the market opportunity in the early stage to
get a competitive advantage. With the time, many new techniques of management accounting
have also been developed like balance scorecard, Just in Time which helps the managers in
their respective field as added by Williams, (2014). These new techniques have done business
to grow in this competitive environment and have also helped them to increase their revenues
by making operations more efficient.
PRACTICAL EXAMPLES
Management accounting is used by many companies in order to help them to analyze
the market situations better. Two of the most popular companies that use the management
accounting are Woolsworth and Australia. Both the companies have gained lots of
advantages through modern practices of accounting.
Woolsworth is one of the best retailers in Australia, and it is using modern accounting
practices in order to manage its operations from the very long time (Burns, 2013). The
company uses the management accounting techniques called as Strategic Triangulation of
management accounting. The primary strategic elements of Woolsworth are directly based on
quality, cost and time. It is in the retail business, so it becomes important for the company to
maintain the quality of its products and procure all the material at the minimum cost. It is also
important for them to have all the resources on time (Tayles, 2016). The company values the
relative importance of all three factors that are predicted on its customer base along with
preference of demand in the market. In some cases, Woolsworth demands products subject to
different primary issues of time and cost, on the other hand, there are customers that demand
quality and are different to cost factor.

Management accounting principles are also used in Apple INC which is the world’s
largest technology company. As compared to other technology leading companies, Apple
from the very beginning is known for its efficient cost management. Apple follows three
principles of management accounting that are cost management, transfer pricing and
responsibility management (Ikäheimo, 2013). Company analyze the suppliers market with
balance scorecard of accounting management and then procure the materials at low prices. It
also uses the transfer pricing as tax shields which has allowed them to retain most of its profit
and all is possible because of market analysis was done by management accounting (Hald,
2016). The third is responsibility accounting which is company’s DNA as all the principles of
accounting are strictly enforced which have made the decisions swift and communication
clear between the top and bottom levels of employees.

APPENDIX
Figure 1: Management Accounting and Supply Chain Strategy
(Source: Hald, 2016)

Figure 2: Strategic Management Accounting
(Source: Tayles, 2016)

REFERENCES
Online
Hald, K., 2016. Management Accounting and Supply Chain Strategy. [Pdf]. Available
Through: <http://openarchive.cbs.dk/bitstream/handle/10398/9373/Hald_Thrane.pdf?
sequence=1>. [Accessed on 11 September 2017].
Tayles, M., 2016. Strategic Management Accounting. [Pdf]. Available Through:
<https://link.springer.com/chapter/10.1057/9780230353275_2>. [Accessed on 11 September
2017].
Books and Journals
Bromwich, M. and Bhimani, A., 2005. Management accounting: Pathways to progress. Cima
publishing.
Burns, J., 2012. The paradox of strategic management accounting. Management Accounting
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Burns, J., 2013. Social and environmental accounting, organisational change and
management accounting: A processual view. Management Accounting Research. 24(4).
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Burns, J.O. and Needles, B.E. eds., 2014. Accounting Education for the 21st Century: The
global challenges. Elsevier.
Burritt, R.L., 2013. Environmental management accounting: the significance of contingent
variables for adoption. Journal of Cleaner Production. 41. pp.163-173.
Castells, M., 2014. Technopoles of the world: The making of 21st century industrial
complexes. Routledge.
Ditillo, A., 2012. Opening the black box of management accounting information exchanges
in buyer-supplier relationships. Management Accounting Research. 23(2). pp.61-78.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Dumitru, A.P. and Matei, C., 2014. MANAGEMENT ACCOUNTING AT THE
BOUNDARY BETWEEN CLASSICAL AND MODERN. Challenges of the Knowledge
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Emmanuel, K.M.C., 2013. Readings in accounting for management control. Springer.
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knowledge and avenues for further research. Journal of Management Accounting
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Ikäheimo, S., 2013. On the convergence of management accounting and financial
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Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and
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