History of the Rise and Fall of Management Accounting - The Loss of Relevance

Author: Johnson
Publisher:
Publish Date: 2004-04-01
Features: Management accounting is very crucial for the long-term planning of enterprises. However, facing the rapidly changing technological environment, fierce domestic and global competition, and rapidly improving information processing capabilities, existing management accounting systems have become somewhat outdated and struggle to meet the needs of businesses. In the book "The Rise and Fall of Management Accounting," the two management accounting professors, Johnson and Kaplan, combine their unique perspectives to describe the transformation of management accounting in the U.S. economy—from early textile factories to today's computer-controlled automated manufacturers. As they state, "Understanding the reasons behind the decline of existing systems should provide better rational guidance for organizational change."
The book begins by tracing the development of some simple textile factories in the early 19th century. Management accounting systems reported highly inaccurate product costs, and efforts to improve production efficiency were misguided, making large, decentralized U.S. enterprises vulnerable to attacks from smaller, specialized competitors. The ineffective management accounting systems prevented companies from achieving profits through centralized management and diversified policies. The purpose of this book is to provide a historical background for those interested in redesigning management accounting systems today. By exploring the origins of current management accounting practices, professionals in the industry can better understand that attempting to increase relevance to decision-making and control in management accounting is not an innovative idea. This aligns with the practices of the early days when management accounting originated.
This book not only reviews the origins and stagnation of management accounting practices but also provides significant, perhaps unprecedented, opportunities for the reconstruction of corporate management accounting systems in the 1980s. The obsolescence of existing systems, along with severe competitive and technological challenges, requires all businesses to reevaluate their current practices. They must attempt to establish a completely new management accounting system. Just as over 60 years ago, before the rise of mass assembly line production and multi-departmental enterprises, corresponding changes in organizational structures and production processes had already begun. The later chapters of this book introduce some major transformation pathways. The author does not provide detailed explanations of specific methods but offers a conceptual framework for designing management procedures aimed at strengthening process control, calculating product costs, and evaluating periodic performance. These chapters will help practitioners, researchers, and educators to clarify their efforts and improve the practice and theory of management accounting.