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Present And Future Of Management Accounting

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Management accounting, is one genre of accounting, which unlike financial accounting, deals with the provision of timely and precise financial information useful for the purpose of decision making in business. The need for management accounting was felt with the change in the dynamics of the businesses and commercial activities, which contributed to their complexities. Though having its base in the early nineteenth century, accoeding to many researchers, the management accounting, as a profession has significantly changed over time, taking into account its flaws, criticism and needs of the situations. The essay tries to see the course of evolution of management accounting as a profession, over the years, in a global framework (Kaplan, Atkinson & Morris, 1998).  

Evolution of management accounting

The notion of management accounting before 1950, was that of a simple technical process which was mainly beneficial for the purpose of fulfilling the organizational objectives of the commercial enterprise. This mainly dealt with the determination of the cost of production of a business, as the business activities at that point of time were not much complicated. As the costs of production were identifiable easily, management accounting resembled the format of cost accounting broadly.

A more robust management accounting system appeared in the nineteenth century in the United States of America. This type of accounting was an amalgamation of simple as well as complicated methods of accounting. These new frameworks, also including cost accounting, intended to keep a tab on the outflow of resources and in maintaining a timely and accurate report for the purpose of management of the business activities and also for helping future speculations.

Management accounting in the nineteenth century also saw a few other progress which helped it to shape up more efficiently. With the emphasis on the productivity and efficiency of utilization of the capital resources, the need was felt to account for the performance of such resources in the commercial activities. This gave rise to the Du Pont procedure for management accounting, which had the provision to evaluate how well a firm can utilize the capital assets which are present with it. This method seemed to be immensely beneficial for the purpose of making the investment decisions in the commercial activities.

Non accounting information usage, as a part of this type of accounting also came to existence in the first half of that century itself, which indirectly involved an economic perspective as well. This method involved the studying and analyzing of the financial behaviors of the different agents who are participating in the business activities, both on the demand side as well as on the  supply side.

From 1950 till now

Though before 1950, the management accounting was a simpler process, slowly evolving and showing characteristics which were quite unique and different from the usual accounting behavior, the focus of this genre shifted massively from just financial accounting to dealing with information in the aspects of planning and controlling the commercial activities of a firm. The activities were getting slowly molded towards the control of the internal administrations and planning for the future business ventures.

With the management accounting techniques becoming more of a problem detecting and solving one, in case of irregularities and fluctuations in the business activities, newer methods went on evolving in this field and nearly 30 methods came into existence by the end of the 1980s. In 1950s the methods followed were Cusum charts and transfer pricing, which led its way to technical methods using computers by the end of 1960s. Decision tree and Zero budgeting also came into existence in this period. Economic insights were included in this genre fro, 1970s with the increasing complexities and cognitive nature of the commercial enterprises and the expansion of their domain. Portfolio management and techniques like just in time scheduling also came into existence at this point of time (Parker, 2002).

The 1980s saw few global economic turmoil like the oil price increase and a world wide recession. The period was also marked by a huge increase in competition  in the commercial environment in the international framework. The commercial enterprises needed a far more comprehensive method of management accounting and this need gave rise to more robust forms of management accounting processes and the cost accounting and management techniques also saw huge transformations. The primary challenge for the management accountants became the proper usage of these techniques so as to find out the information which would be beneficial for the businesses to stay ahead of their competitors in the global business framework. Techniques like targets costing, Benchmarking  and the value added type of management also came into existence during this period (Langfield-Smith, 2008).

From the beginning of the 1990s, the global business framework was subjected to uncertainties and unanticipated phenomena which led to the need of taking abrupt decisions on part of the commercial enterprises. The expansion of internet and technological innovations played a huge role in the change in the dynamics of the business activities in the world wide framework. Technology also cam e into use in the management accounting field with the introduction of checking and monitoring mechanisms of customer and shareholder values and other innovations which are used in the current day management accounting.

Management Accounting as a profession has been growing for the last few decades, though the concept has been there since the early nineteenth century. With the growing complexities in business, diversifying specializations and newer innovations in the technology, the needs of the commercial enterprises are also changing in order to stay competitive. In this context, management accounting comes as a cognitive branch of accounting, which not only takes into account the financial statistics, but also incorporates economic and business insights in it to help in making the decision making process easier for the managers.  As can be seen from the recent developments, the evolution of the techniques in this field in the last two decades have been much higher than in the two decades prior to that. The dynamics and the complexities in the business activities are also leading to constant change and innovations in the firld of management accounting as a profession (Waweru, 2010)



It can be concluded from the above discussion that management accounting, as a profession, has had its share of ups and downs and has undergone a huge amount of changes in all of its dimensions. The management accountants over time came across different types of frauds and other hurdles, which in its turn, led them to proceed to find out newer and more innovative way outs, thereby progressing successfully. Technology also, over the years, changed and consistently had impacts on the method of management accounting, in a global framework and is contributing significantly in opening up new arenas for venturing in near future and management accounting, with the features of accounting, economics and managerial insights in it, poses as a robust business tool for the commercial enterprises in future.



Kaplan, R. S., Atkinson, A. A., & Morris, D. J. (1998). Advanced management accounting (Vol. 3). Upper Saddle River, NJ: Prentice Hall.

Langfield-Smith, K. (2008). Strategic management accounting: how far have we come in 25 years?. Accounting, Auditing & Accountability Journal, 21(2), 204-228.

Parker, L. D. (2002). Reinventing the management accountant. Transcript of CIMA address delivered at Glasgow University, 15.

Waweru, N. M. (2010). The origin and evolution of management accounting: a review of the theoretical framework. Problems and Perspectives in Management, 8(3), 165-182.


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