Traditional Management Accounting Essay
INTRODUCTION
Management Accounting uses provisions of accounting information in order to better inform themselves before they decide matters within the organizations, which would help the management and performance of control function (Management accounting, 2017).Here we will compare about the various management accounting techniques which were used 20 years ago and presently by various manufacturing firms. The traditional management accounting practices (MAP) such asbudgeting, costing and profitability analysis mostly focus on internalorganizational issues and are financially oriented. Additionally,recently developed MAP methods form financial and non-financialinformation focusing in a more strategic orientation. Several studies by Angelakis,
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It highlights how various resources are used across an organization’s value-chain – enabling an evaluation of value adding and non-value-adding activities. Comparing it with the traditional environment, the current business environment is characterized by greater investments in technology and consequently greater overhead costs, greater product diversity, greater global competition and greater consumerism. In such an environment, a system which delivers more accurate, reliable and relevant cost information upon which to base short and long-term decision-making is advantageous for users (Suzanne, Stower, & Torry, 2013). ABC allocates the costs to objects more reliably and accurately. The user can easily understand and evaluate how the resources can be used over a firm's value chain to deliver the strategic and decision making outcomes.
Traditional cost methods fails to allow the management to meet the implementation of cross functional approach, quality, flexibility, time, capacity and cost which are essential to operate the business. To cover the inefficiencies, ABC comes with a model and assist the users to focus on cost reduction and performance improvement. It also helps in diagnosis of various problems related to cost issues and tactical issues in management. Furthermore, it assists in achieving the organizational goal by providing with value added and non-value added activities to the
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