1. Coursework title: Evolution of Management Accounting discipline and its relationship with other functions in organizations
2. Module Number: ACC2130
3. Module Name: Issues in Management Accounting
4. Academic Year: 2013-14
5. Student First Name: Magali
6. Student Last Name: Bokungu
7. Student ID No.: M00328257
8. Student’s Email ID (MDX): MB1665@live.mdx.ac.uk
9. Student’s personal Email ID: firstname.lastname@example.org
This paper starts with introducing importance of management accounting In addition it identifies the management accounting theoretical development, and the main critiques that shapes the development of management accounting, thus creating a ground for future research or reviews. As well as it presents challenge existed in the field and concludes by advocating field-based research to discover the innovative practices being introduced by organizations successfully adapting to the new organization and technology of manufacturing.
2. Summary of Historical Development of Cost Accounting
In terms of accounting development, railway companies started register cost information in accounts (Chandler, 1977 cited on Darius Gliaubicas (2012)) and also Chandler [1977, pp. 109-120] (cited on Robert Kaplan 1984) provides evidence of how U.S. railroads, in the 1860s and 1870s, developed accounting procedures to aid them in their extensive planning and control procedures. Railroads handled a vastly greater number and dollar volume of transactions than had any previous business and, as a consequence, had to devise procedures to record and summarize an enormous number of cash transactions. These procedures also generated summary financial reports on the operations of the many sub-units within the large, geographically dispersed railroad companies. In addition to the financial summaries, the railroads developed a system of reporting operating statistics for evaluating and con-trolling the performance of their sub-units. Statistics such as cost per ton-mile and the operating ratio (operating in-come divided by sales) were routinely reported for various sub-units and classes of service. Later in the 1880s, the newly formed mass distribution [Chandler, 1977, Chapter 7(cited on R.kaplan1984)] and mass production enterprises adapted the internal accounting reporting systems of the railroads to their own organizations. The nationwide wholesale and retail distributors produced highly detailed data on sales turnover by department and by geographic area, generating performance reports very similar to those that would be used 100 years later to monitor the performance of revenue centers in the firm. Mass production enterprises formed in the 1880s for the manufacture of tobacco products, matches, detergents, photographic film, and flour. Most important was the emergence of the metal-making and fabricating industries. Andrew Carnegie's steel company was a particularly good example of the importance of cost accounting information for managing the enterprise. Shinn's [the general manager's] major achievement was the development of statistical data needed for coordination and control. Shinn did this in part by introducing the voucher system of ac-counting which though it had long been used by railroads was not yet in general use in manufacturing concerns. By this method, each department listed the amount and cost of materials and labour used on each order as it passed through the sub-unit. Such information per-mitted Shinn to send Carnegie monthly statements and, in time, even daily ones providing data on the costs of ore, limestone, coal, coke, pig iron, Spiegel, molds, refractoriness, repairs, fuel, and labor for each ton of rails produced.
These cost sheets [were] called "marvels of ingenuity and careful accounting." These cost sheets were Carnegie's primary instrument of control. Costs were Carnegie's obsession.... Carnegie concentrated...
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