How To Rejuvenate A Mature Bus :: essays research papers

The last two decades has seen a revolution in focussing accounting theory and practice due to the challenges of the competitive milieu in the 1980s. Kaplan and Johnson (1987) identified the failings and obsolescence of existing cost and performance measurement systems which led to re-examination of traditional cost accounting and management control systems. Conventional pecuniary and management accounting methods have developed primarily as a result of corporate legislation in the 1930s forcing companies to provide foreignly published financial accounts. Management accounting is primarily focused as a decision making tool for running a business, hence they require more flexibility. fit in to Kaplan management accounts have become a subset of financial accounts and that they reflect more on the external rather than internal requirements of the company. roughly of the managerial decision-making and control systems in use in the late 1980s were described by Johnson and Kaplan as stagnant. As a result, they went onto research in new accounting systems raising the write of internal accounting systems by use of financial and non-financial measures although their work was seen as controversial by Drury but is now considered of key importance to manufacturing industries aiming to become terra firma class. This essay aims to discuss the ways in which new management accounting techniques can bring life into mature businesses, in particular those using non-financial measures.Most companies still use the same cost accounting and management control systems that were developed decades ago in a competitive environment drastically antithetical from today. These systems have major drawbacks described belowh They distort product costs i.e. absorption of production overheads into product costs for the purpose of stock valuation. The external financial inform process was purely driving this allocation of overheads for stock valuation. h They do not produce the key non-f inancial data required for hard-hitting and efficient operations, hence they are of little help to operating managers seeking to reduce costs and improve productivity. h The data produced reflected on external reporting requirements far more than the reality of the new manufacturing environment.h Failure to provide accurate product costs as they were distributed by simplistic and arbitrary measures normally direct labour based.h The short term profit pressures led to a decline in long term investment. These poorly designed or outdated systems can distort the realities of manufacturing performance. As companies become more efficient by using new technologies, labour costs are accounting for a smaller proportion of a companys overall cost, hence the allocation of overheads to labour hours will become irrelevant and counter-productive to the companys operations.