Case Study 1

The evolution of management accounting coincides with the importance of financial information in organizations decision making. The evolution of financial accounting can be traced to ancient times, where merchants began keeping an account of their cash and complex business transactions. The post-industrial revolution saw the emergence of cost accounting and highlighted the importance of standard practices in cost ascertainment and cost control. Standard costing, marginal costing, budgeting etc., evolved as part of the emphasis given to the cost and financial data in organizations survival and growth. To a great extent, all these developments is the result of increased competitive pressure in the post-industrialization era.

Management accountant plays a strategic role in the corporate organization, and often use past data to predict future. Management accountant, as the name shows, support the management in providing necessary data that are useful for their decision making. Firms became larger and more decentralized, and this increased the need for management accounting. Management accounting/costing was a necessary tool of the new industrial capitalism of the late nineteenth century, developing to evaluate a companys internal processes measuring efficiency in mainly single activity firms.

Although some of the management accountings key techniques and approaches were admittedly quite well established (i.e. old and taken from financial accounting and cost accounting), more tools and techniques emerged that highlight the significance of management accounting over the years.

Based on the above, answer the following questions

Question No. 1

What are the major differences, evidenced in the above case, between management accounting, cost accounting and financial accounting? Do you think that management accounting is essential for all types of organization? Briefly explain. [5 Marks]

Question No.2

1. It is mentioned in the case that management accounting is future oriented. Do you agree to this statement? Justify your answer. [2 Marks]

2. A management accountant plays a major role in todays organization. What are the major functions of a management accountant in an organization? Explain your answer by citing the information provided in the case. [3 Marks]