Evolution Of Management Accounting Analysis

The business environment change with time and the consumers’ needs. The evolution in management accounting mainly because of the firms in the business environment require different methods which provide most useful output, depends on the nature of the firms. Besides evolution, there are also issues that being pointed out by the Institute of Management Accountants (IMA). Data shows that there are 98% of distorted management accounting information, however 80% of the feedbacks saying that change is not a priority for not (Clinton & van der Merwe, 2006, p14). This paper will first discuss about the definition of each of the management accounting methods, then will evaluate the evolution and efficacy of these management accounting methods. Lastly,

Stage 1 is related with ‘cost determination and financial control’, stage 2 is about the ‘provision of information for management planning and control’, while stage 3 is concerned with ‘reduction of waste of business resources’, and lastly stage 4 is about the ‘creation of value through effective resource use’ (Esmalifalak, H Albin, M Behzadpoor, M 2015, pp58-67). The management accounting methods that I’m going to use for the discussion for this paper are traditional costing, or also known as Volume Based Costing (VBC), Activity Based Costing (ABC), and Resources Consumption Accounting (RCA). VBC is a method that allocate the manufacturing overhead based on the volume or units produced. ABC is one of the management accounting method that allocate the product costs by identifying all possible activities incurred to produce a product. RCA is a new management accounting approach that able to provide managers with enterprise optimization information (RCA Institute, n.d.). This costing method consists of 3 basics; the resources are regarded as the starting point, cost structure is monitored perpetually, and the amount based approach is used in modelling the costs (Okutmus, E 2015, pp.

2011, pp. 41-51). Compared to other management accounting methods, RCA focuses on creating a logistics-centred costing model where the quantity and monetary amount from the documents entered into the firm are never separated; this treatment able to minimise any massive special efforts to reconnect the operational data to the monetary data (White, L 2009, pp. 63-77). The logistics-centred based data will have better incorporate information which able to help the managers to make correct decision that bring in the economic benefits. For businesses who are using the lean management techniques, RCA will be able to provide marginal cost information to the managers for short-term decision making purpose (Grasso, L 2005, pp. 12-27). This information are relevant for activity budgeting analysis which is very useful for resource allocation in the firm, thus achieve fully utilisation of