The Development of Cost and Management Accounting:
A Historical Perspective
Adum Smith Ovunda*
*
[Rivers State University of Science and Technology, P.M.B. 5080 Nkpolu Oroworukwo, Port Harcourt, Rivers State, Nigeria ],
[ovusmith@yahoo.com]
© 2015. Adum Smith Ovunda. This is a research/review paper, distributed under the terms of the Creative Commons
Attribution-Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/, permitting all noncommercial use, distribution, and reproduction in any medium, provided the original work is properly
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The Development of Cost and Management Accounting:
A Historical Perspective
Adum Smith Ovunda
Abstract
The aim of this paper is to describe the historical origin and development of cost and management
accounting. This study has successfully linked the modern management accounting systems to the past to
ensure a better understanding. It was gathered that the existence of cost accounting as one of the oldest
managerial tools dates back to the ancient times. The formal beginning of cost and management
accounting is ascribed to the industrial revolution of the nineteenth century which was characterized by
the emergence of large business enterprises. The nineteenth century, according to Parker (1969) is
regarded by accounting historians as the “costing renaissance” during which important developments in
cost and management accounting took place and most of the methods that are in use today appeared in
manufacturing companies.
Keywords: Cost Accounting, Management Accounting, Management Accounting System.
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I.
Cost accounting, dated back to the ancient times, is
Introduction
Over the years, Cost accounting techniques have
been employed in the determination of the prices of
products as well as in assisting and facilitating the
process
of
decision
making.
Although
cost
accounting has evolved as a result of advancements
in production technology, some of its early practices
may be stated to be somewhat similar to those that
are being used today.
historical development of cost and management
accounting and the reasons that support this
development in the academic literature. A better
understanding of the modern cost and management
accounting systems which are otherwise referred to
as the „traditional‟ systems can be achieved if they
are properly linked to the past. This is to say that it
would be better appreciated if the historical
perspective is brought to lime light. However, this
study would examine the evolution of the traditional
systems by way of describing the various methods
of cost allocation, cost drivers as well as their
usefulness in the decision making process. This
study would also create a link between the old and
practices
the amount of taxes that were taken by kings or used
to determine the prices of the products that trading
people of antiquity were selling. The trading people
of ancient times such as the Chinese, Egyptians and
Arabs had accountants in the service of the royal
courts, some of whom were experts in the
determination of costs (Perren, 1944). According to
Perren (1944),
The main objective of this study is to examine the
modern
one of the oldest managerial tools used to determine
in
cost
and
management
accounting thus, providing a guide for researchers
and advanced business students in the event of
future researches.
© JournalsBank.com (2015).
In Egypt, 3,000 years before Christ,
accountants had to present to the Pharaohs
each year a detailed report on the net cost of
harvest, so that just taxes on wheat could be
levied. The ancient Code of Manu made
obligatory the periodical auditing of trading
profits by court auditors. ...... In Books VII
and VIII of these sacred Laws we find the
following two passages: `Merchandising
experts will establish the sales price of
goods, so that the king may levy 1/20 of the
profit
thereon'
...`the
sales
price
of
merchandise shall be evaluated according to
the distance it has travelled, the time it is
kept in storage, the expenses connected
with it, the time it has to travel to reach its
final destination, and the profit that can be
anticipated.
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The duty of calculating the costs of products in
structures, were very similar to many of the
ancient times was performed by court officials and
techniques employed in cost accounting in the
the whole essence was to be able to determine the
twentieth century. Take the evaluation of byproducts
value of taxes. At about 1100 BC in ancient China,
as an example. This paper is aimed at presenting a
there existed some form of government auditing,
historical perspective of the development of cost and
budgetary
and
management accounting. Secondary data sources are
periodic reporting. These were some of the costing
employed in the literature review section of the
techniques
study in which textbooks, journals, papers, and other
accounts,
used
by
expenditure
governments
control,
in
ancient
civilizations.
The nineteenth century saw the emergence of large
business enterprises like the textile mills, iron and
still works, which made extensive use of machinery
in industrial production, hence the general belief
that cost accounting is a product of the nineteenth
century. For the systematic recording technique of
cost accounting which was developed in the
nineteenth century and extended later on, this belief
holds sway. But there existed much older elements
of costing in the form of industrial bookkeeping
practices and techniques. As early as the beginning
of the fourteenth century, some industrial accounts,
early and simple forms of cost accounting were in
use, as shown by some medieval business records
that exist in the twentieth century (DeRoover, 1968).
To support this argument, Edwards and Newell
scholarly presentations were used to do justice to the
study.
2.
The Origin of Cost Accounting
Generally, in the accounting history, it is believed
that the double entry system of accounting formally
started with Luca Pacioli‟s Summa which was
published in 1494. But facts in the accounting
literature show that double entry bookkeeping was
already in practice by the Venetian merchants and
several others in Northern Italy long before Pacioli‟s
treatise which only described the system. Though he
never laid claim to the invention of the allembracing double entry system of accounting,
researches have shown that he laid the stepping
stone hence, his recognition as the father of modern
bookkeeping (Adum, 2015b).
(1990:41) state that the use of product costing is not
Arabic numerals were introduced around the early
a product of the nineteenth century.
thirteenth century as a result of the extensive trading
The costing techniques that were practised earlier on
in the medieval era, apart from their simple
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arrangement which the Italian merchants were
engaged in with Arabs living in the Middle East,
North Africa and Spain (DeRoover, 1956). As
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businesses grew, accounts were used, though in a
resume of costs incurred in producing two pieces of
very simple way, to cost products. In the accounts of
cloths which measured 32.6 meters long and
Garner (1988), a firm known as Del Bene was
8.1meters wide. The byproducts of the production
established to in Florence, Italy to convert raw wool
were deducted from the total to arrive at the net cost
into products.
of the two pieces of cloths. This scenario goes on to
The system of accounting records adopted by this
firm, though very crude when compared with later
developments, represented some of the earliest
examples of cost accounting. At about 1350, the
firm was able to derive prime costs and operated
accounting books for “the results of trading or
mercantile activity” and “the central workshop
data”. Later on such other books as “the book of raw
wool purchased”, “the laborers wage book” and “the
dyers wage book” were established and used. Those
books were used to record every transaction relating
to the purchase of wool, the labor expenses for
manufacture of certain quality and quantity of
woolen cloths, and of course, the cost of dyers.
However,
these
books
were
suggest that the cost of production in modern cost
accounting had been known by accountants about
one hundred years before Paciolo wrote his famous
book. Therefore, as early as the fourteenth century,
applications of some costing techniques and even
single entry recording technique were well ahead of
the theory, which appeared in the late fifteenth
century (Haydn, 1985; Garner, 1988).
3.1
Cost Accounting in the Seventeenth and
Eighteenth Centuries
The most interesting examples of seventeenth
century cost calculations belong to the members of
the Worshipful Company of Bakers in 1620. This
company prepared a cost statement to show that the
periodically
selling price of baked bread in 1620 was not
summarized and the balances in them transferred to
adequate to cover the cost of baking (Garner, 1988).
a ledger book which shared a lot of similarities with
According to Edwards and Newell (1990) about a
the modern ledger. A profit or loss is ascertained at
copper production mine that was located near
the end of the period by subtracting liabilities,
Keswick in 1615,
capital and deferred sales from the total assets.
Similarly, the first workshop that produced cloths
according to Garner (1988) was established by
Francesco di Marco in Prato, Italy in 1382. One of
the books used by the workshop at about 1395 had a
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Hechstetter, owner of the copper mine,
evaluated the relative cost of producing
rough copper in detail. This indicates that
comprehensive accounts of all aspects of
production were kept. Weekly cost of labor,
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various materials, carriage, horses, etc. are
system showed several cost management principles
listed and multiplied by 52 (i.e., the number
particularly between 1759 and 1786. It was the
of weeks in a year). The cost of copper ore,
policy of the company to charge individual
charcoal and other smelting materials, as
managers
well as miscellaneous items such as rent
responsibility of cost management as early as the
and interest are added to this amount which
1760s. The company produced two products-
gives an annual total cost of production.
anchors and anvils. And in a bid to accurately
Hechstetter was using these calculations for
determine production costs, separate accounts were
cost related decision making, from the late
established.
16th century. For example, he calculated
predetermined proportions, allocated overhead costs
the effect on profit of selling copper in a
to departments.
different geographical area; and also the
effects on cost of changing the level of
production.
To show that what is known as process costing also
existed in the eighteenth century, Edwards (1937)
gave a detailed example of the eighteenth century
accounts for “thread hosiery production” set out by
Wardhaugh Thompson, in his book titled “The
Accountants' Oracle” published in 1777. He said,
“the accounts are worthy of note because they show
the materials moving process to process [and]
acquiring costs as they move”. Another example of
the existence of cost accounting in the eighteenth
3.2
and
In
departmental
1763,
the
head
with
company,
the
using
Cost Accounting in the Nineteenth Century
Most accounting professionals, researchers, authors,
and scholars see the nineteenth century as the formal
beginning of cost and management accounting
because this century was characterized by the
emergence of large business enterprises. According
to Johnson (1981), this was the period of the
industrial revolution, during which England and the
US witnessed the upshot of large cotton textile
factories that used cost accounts to ascertain the
direct labor and overhead costs of converting raw
materials into finished yarn and fabric.
century is evident in the account of Fleischman and
Also contributed to the advancement of cost and
Parker (1990). They explained the accounting
management accounting were iron and steel works,
system of the Carron Company, which began
and the construction of railroads particularly in the
operations as a pioneer iron foundry in Scotland in
US (Johnson and Kaplan, 1987). Charlton Mills of
1759. During the industrial revolution, the company
Manchester according to Stone (1973) had a
adopted a superior cost management system and its
complete cost accounting system that was first used
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as early as 1810 and it was integrated with a double
sales price. The Charlton mill cost accounting
entry system which produced a trial balance on s bi-
system also recognized depreciation which it
monthly basis. The system had fourteen cost centers
charged twice a year at an annual rate of 5%.
in which prime costs for labor and materials were
Interestingly, Tyson (1992) pointed out that
collected and general expenses were allocated to
depreciation as was widely understood in the British
them using some predetermined rates. In the
textile industry in the 1830s. But it was yet to be
Charlton mill, cost accounts were designed to reflect
used by the US textile or cotton mills at that time.
the cost flow of the manufacturing process. The
Johnson and Kaplan (1991) contend that cost
system charges the costs of raw cotton to the
accounts in which remarkably sophisticated cost
warehouse trading account at purchase price plus
systems were used survived from integrated multi-
freight-in.
process cotton textile mills in the US about the first
Wages for cleaning process were also charged to the
warehouse account. After reflecting those charges in
the warehouse account, the cotton would then be
transferred to the five carding rooms at prime cost.
half of the nineteenth century. The purpose of cost
accounting in those mills was to coordinate, control
and increase the efficiency of conversion process,
material and labor utilization.
Every output of the carding room was transferred to
Also, in the nineteenth century, the Iron and Steel
eight spinning rooms while the waste was
Industry was another large scale production
transferred to the warehouse. Note that five carding
environments
rooms and the eight spinning rooms were each
processes and reliable cost data were expected to
treated as a cost centre. Every direct labor expense
emanate. Between the 1820s and 1830s, British
incurred in favor of any carding room was charged
mining and smelting industries were using some
separately while general expenses were allocated to
elements of costs like material, labor and overhead
each of them.
costs (Haydn, 1985:1067) which were similar to the
However, direct labor cost and general expenses
were charged to each spinning room and the
in
which
complex
production
cost elements used at about the last decade of the
twentieth century.
finished products were transferred back to the
The mining and smelting companies charged
warehouse at an extra company price. Now what
overhead costs to departments and products using
happened each time products were sold? The
prime costs in which overhead costs were allocated
warehouse trading account was usually credited at
to departments and products on the basis of a certain
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percentage of direct materials, direct expenses, and
renaissance” during which important developments
direct labor. Overhead costs were also charged to
in cost and management accounting took place and
departments and products using direct labor hour
most of the methods that are in use today appeared
methods in which overheads are allocated on the
in manufacturing companies. Furthermore, Johnson
basis of a percentage of the labor costs that could be
and Kaplan (1991) contend that costing practices
clearly identified with a specific department or
such as standard costing, process costing, overhead
product (Edwards & Newell, 1990). At about the
utilization as a cost element and its allocation to
last quarter of the nineteenth century, one iron and
products or departments using machine/labor hours
steel company which was managed by Andrew
or prime cost methods, etc., were all used in the
Carneige was by virtue of his managing strategy,
industries discussed above. These techniques,
regarded by some authors as being one of the
however, were greatly improved in the first quarter
earliest
of the twentieth century.
utilization
of
cost
information
for
management needs in the US.
According to (Johnson & Kaplan, 1987), this giant
steel manufacturing company which was managed
by Carneige for about 30 years adopted a cost
accounting system that was primarily concerned
with continuous gathering of data on all direct costs
relating to every process of the manufacturing
activity from the blast furnace to the rolling mill. In
the same vein, just like the manufacturers, the
railroads devised cost accounting systems to
evaluate and control their internal processes of
providing transportation services. Here, the ton-mile
was used as the basic unit of output, and complex
internal accounting procedures were created to
calculate the cost per ton-mile.
The nineteenth century, according to Parker (1969),
is regarded by accounting historians as the “costing
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3.3
Cost Accounting in the Twentieth Century
In the late nineteenth century up till the early part of
the twentieth century, engineering managers such as
F. Taylor and Emerson devised new cost accounting
procedures primarily to assess and control financial
and physical efficiency of processes (Johnson &
Kaplan, 1991). Because of the financial and physical
efficiency mentioned, one may be tempted into
concluding that it was meant to evaluate the overall
profitability of the company. No. The whole idea
was aimed at assessing the efficiency of processes.
The cost systems which existed in 1910 provided
information that was relevant to a wide range of
decisions
concerning
efficiency
and
product
differentiation.
The systems were designed by engineers working in
factories to assign costs to products and product
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lines. After 1910, these practices faced out probably
used today, emphasized on such mechanics of cost
because the collection of cost information was very
accounting
difficult and expensive for a widening range of
requisitions, time cards, vouchers, purchase orders,
products thereby making it nearly impossible to
etc (Anthony, 1989). As a matter of fact, in the
justify their benefits (Kaplan & Atkinson 1989). In
1930s and 1940s, there were no textbooks
their place, several other costing procedures came
emphatically devoted to management accounting.
up and the twentieth century accountants adopted
them to evaluate the cost of inventories for financial
reports.
as
journals
and
journal
entries,
In other words, the books which existed during
those periods dealt with numbers and the aim was to
determine the true cost of manufacturing. This
However, while this kind of cost information was
suggests that management accounting should deal
reliable for evaluating cost of inventories and
with making decisions as well as the behavioral
financial reporting, it was irrelevant and even
factors that affect managers who use those numbers
misleading for decision making needs, particularly
and not just the numbers. “Cost accounting is
for strategic product decisions. An economist,
concerned with cost accumulation for inventory
Maurice Clark, in his book “Studies in the
valuation … whereas management accounting
Economics of Overhead Costs”, which he published
relates to the provision of appropriate information
in 1923, discussed fixed and variable costs; joint,
for
sunk, differential and residual costs; short and long
performance evaluation (Drury, 2004)”.
run fluctuations; and a number of other issues from
the economist‟s point of view. This book which
most researchers and historians consider as a major
contribution to cost accounting literature in the
1920s also advocated that different costs should be
used for different purposes.
4.
The Emergence of Management Accounting
Cost accounting and management accounting were
in most cases used interchangeably in the 1940s‟
business curriculum. However, some textbooks
which had almost the same terminologies as are
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decision
making,
planning,
control
and
In management accounting, different costs are
employed
for
different
purposes
while
cost
accounting focuses on the measurement of full
costs. With this distinction between cost accounting
and management accounting coupled with Maurice
Clark‟s contention that different costs be used for
different purposes, Bill Vatter came up with the first
textbook on management accounting which was
published in 1950 (Johnson and Kaplan, 1991).
According to Anthony (1989), Shillinglaw and
Horngreen in 1961 and 1962 respectively, published
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the first cost accounting textbooks with managerial
cost information due to the fact that they were
emphasis. Horngreen (1989) states that among cost
simply obsolete and
accounting textbooks, the emphasis on cost control
requirements of the new production environments.
and management decision making shifted from 27%
In the same vein, Johnson and Kaplan (1987) aired
of the total chapters in 1945-50 to 54% in 1961-70.
their views on the obsolescence of the existing cost
During the same periods, however, inventory
and management accounting systems in their book,
valuation that comprised 73% of the textbook
Relevance Lost: The Rise and Fall of Management
chapters in 1945-50 declined to 46%. This shows a
Accounting which was published in the mid-1980s.
growing
interest
of
using
cost
accounting
information in decision making, rather than simply
for inventory valuation and financial reporting.
could
not
capture
the
However, the article “Hidden Factory”, published
by Miller and Vollman (1985) which introduced
“transaction based costing” and a couple of case
During the 1950s and 1960s, researches were
studies
carried out by scholars the focus of which was on
environments, resulted in the introduce a new
relevant costs for decision making. This period saw
product costing system called “Activity Based
the analysis of the cost concepts that relate to capital
Costing” by Robin Cooper and R. S. Kaplan. They
budgeting,
cost-volume-profit
explained the system in their article titled “Measure
decision models which of course, were relevant to
Costs Right: Make the Right Decisions”. But
decisions
manager.
Cooper (1990) later refined and organized the
information
system by adding such new concepts as hierarchy of
economics approach was replaced by agency theory
activities. It is these developments and other new
research which viewed accounting information as
challenges faced by the traditional cost accounting
the basis of contracting between economic agents
systems that pushed managerial accounting to such a
that have different ownership rights, different
critical stage that its development and some of its
information, and different prior beliefs (Kaplan,
conceptual foundations are being so scrutinized than
1984). Some researchers in the 1980s began to
has ever been done (Shillinglaw, 1989). The good
express their discomfort over the state of cost and
news about these latest developments is that it has
management accounting.
made the researchers to be so optimistic about the
Thereafter,
inventory,
made
the
by
and
an
individual
single-manager
The traditional cost accounting systems were
performed
in
real
manufacturing
future of modern cost and management accounting.
strongly criticized on the grounds that they distorted
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4.1
Development of Management Accounting
There is no universally accepted view in respect of
the origin and development of Management
Accounting. As a matter of fact, the issue of when
management accounting originated and the reason
behind the development is still in contention. Some
associate the beginning of management accounting
to the requirement for information to optimize
economic resources during the Industrial Revolution
in the United Kingdom (Edwards, Boyns &
Anderson 1995). Others such as Chandler (1977)
and Johnson & Kaplan (1987) suggested that the
reason the development of management accounting
was attributable to the creation of large corporations
that internalized transactions, which were previously
priced by the market.
management accounting to have originated as a
result of efforts by the accountancy profession to
develop her knowledge and techniques into systems
of managerial control in order to achieve managerial
ascendancy. However, in view of Maher (2000),
“while management accounting concepts can be
traced back at least to the beginning of the Industrial
Revolution, management accounting as a teaching
discipline appears to have got off the ground in the
late 1940s.”
4.2
Development of Management Accounting
From 1700 – 1950s
According to the International Federation of
Accountants (IFAC) (2002), the period before the
First Management Accounting Revolution (that is
the period from 1700 – 1950s) is known as the
In their opinion, this occurred shortly after the
“classical period” which ended in the late 1950s.
coming of the railways and the telegraph in the
Within this period especially from 1820-1885, there
United States of America. Another school of
was little or no contribution to cost accounting
thought saw the origin of management accounting
(Robles and Robles, 2000). In other words, this
but as a means of exploiting the society and as such,
period was merely characterized by the recording
justifies and mystifies the existence of structural
financial information. Thereafter, according to
inequality in the society (Neimark &Tinker, 1986).
Johnson
Yet another school of thought according to Hoskin
organizations began to emerge-the textile mills in
& Macve (1988) saw management accounting to
the first half of the nineteenth century, the railroads
have originated when it was used for the purpose of
in the middle of the nineteenth century, as well as
cost
the steel companies of about the second half of the
control
specifically
when
accounting
information was used to exert human accountability.
&
Kaplan
(1987),
hierarchical
nineteenth century.
But Armstrong (1985) had a different view. He sees
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The Industrial Revolution of the eighteenth and
where
nineteenth centuries created a very high need for
bookkeeping to a point where the best practices
accounting information to be able to cope with the
approximated the descriptions in modem textbooks
business operations of the time which had become
(Chatfield, 1977). Such disciplines as economic and
more complex thereby posing enormous challenges
engineering
to accountants to provide the much needed
development of management accounting. One of
information. Accountants were expected to provide
such contributions according to (Parker 1969) was
the relevant information necessary to control
that of Henry Hess, a mechanical engineer who
expenditure and fix prices for manufactured
developed
products because manufacturing activities were very
contribution of Hess was affirmed to be the last in
much on the increase (Wyatt, 2002).
mean time owing to the fact that cost accounting
Management accounting may be viewed to have
started between 1880 and 1889 as Robles & Robles
(2000) have it that “By that time there was
remarkable progress in Management Accounting,
mainly
related
to
burden/overhead
concepts,
emphasizing the need of accounting by functions.”
The pioneering works of Du Pont (1903) and
General Motors (1920) led to the development of
several management accounting practices. By this
time, cost accounts for labor, material and overheads
as well as budgets for cash and income, flexible
budgeting, standard costs, variance analysis, transfer
prices and divisional performance measures had
appeared (Jones 1995:139).
Management accounting procedures
the
methods
contributed
the
first
resembled
medieval
immensely
breakeven
to
chart.
the
The
after 1920 became increasingly dominated by the
financial accounting mentality and organizations
were increasingly run by “numbers” (Johnson &
Kaplan, 1987). (Johnson & Kaplan, 1987) further
emphasized that nearly all management accounting
practices that are still in use had been developed by
1925.
4.3
Development of Management Accounting
from Late 1950s – 1980
The very first Management Accounting Revolution
otherwise referred to as the “modern management
accounting period”, started in the late 1950s and
ended in the early 1980s (Epstein & Lee, 1999).
During this period a lot of new researches were
to
carried out and new decision-making tools for
develop as managers constantly sought information
managers were also provided. The researches during
to improve efficiency and profitability. Between
this period mainly focused on profit maximizing
1885 and 1920 cost accounting evolved from a level
models like linear programming, cost variance
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began
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investigation models, transfer pricing, performance
In 1956 Robert Anthony wrote a textbook which
evaluation and opportunity cost models. All these
focused on
models were based on neo-classical economic
theory (Ashton et al. 1991; Scapens, 1991).The
management accounting tools that were developed

How to formulate or analyze new problems

Appropriate measures of cost.
during this period according to Epstein and Lee
This book paid more attention to the decision-
(1999) reflected economic theory and were based on
making role of cost management than on the
the following assumptions:
techniques of cost determination. But two issues

Tasks are reutilized at the managerial and
operational levels.

The
external
environment
(in
which
the
company operates) is stable with few price or
demand fluctuations.

The sole purpose of management accounting is
to aid decision making.
came up: “the direct costing controversy in the
1950s” and “the mathematics of management
accounting in the 1960s” as a result of the new
approach to management accounting information for
decision making. The issue of direct costing
controversy borders on the difference between direct
and absorption costing which of course lies in the
recovery of fixed costs. For absorption costing,
Out of the need for decision-making tools to solve
fixed overheads are allocated to all the units
the traditional problems of improved profit and
manufactured. But in the case of direct costing,
efficiency, new techniques evolved just after the
fixed costs are allocated to the actual units sold.
Second World War. These techniques were based on
Parker (1969) came up with an idea which
developments in economics and decision theory.
emphasized the importance of decision making and
However, the new decision-making tools did not
using different costs for different purposes.
take
into
account,
such
external
forces
as
technological change, changes in product demand,
or initiatives by competitors (Epstein & Lee, 1999).
Epstein & Lee (1999) therefore concluded that the
new
decision-making
accounting
assumed
tools
in
unbounded
management
rationality,
unlimited data and that the costs of these analyses
generally were less than the benefits.
© JournalsBank.com (2015).
However, Maher (2000) suggested a three-way
classification of costs which still forms the
cornerstone of management accounting courses.
They are: differential costs, full costs, and
responsibility
management
costs.
accounting
The
on
mathematics
the
other
of
hand
emphasized on mathematics as the language of
science and according to Boer (2000), if the
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European Journal of Humanities and Social Sciences Vol. 34, No.1, 2015
education provided by business schools were to be
production function had undergone some changes
scientific, then management accountants should
even though management accounting could not
increase their knowledge of mathematics. So such
address such changes. According to Epstein & Lee
concepts as marginal costing, discounted cash flows,
(1999), the changes in production technology
and
required
statistical
cost
estimation
techniques
subsequently formed an integral part of management

accounting training.
4.4
new costing models to describe the production
processes
Development of Management Accounting

From 1980 – Date
the
recognition
that
investment
in
new
accounting systems should be cost effective.
As the world tends to a global village, the world
Note however, here that changes in business will not
economy also changed profoundly. Consequently,
seize to shape the nature of management accounting.
organizations have to face dramatic changes in both
Therefore, management accountants are strongly
business and competitive environments. For so
advised to adapt themselves and their practices to
many reasons such as the deregulation of markets,
supply appropriate information for decision making
improved
purposes.
international
transportation
systems,
improved communication systems, international
competition became more pronounced during this
5.
Summary and Conclusion
period (Drury, 1996). Thus there was increased
This paper has dealt with the historical origin of cost
pressure on organizations to improve the quality and
accounting and traced its development from the very
efficiency of their operations and as such, focus on
beginning down to the twentieth century. The study
customer satisfaction.
has also examined the emergence of management
In a bid to meet these demands, organizations
resorted to the use of advanced manufacturing
technologies robotics, computer aided design, and
flexible manufacturing systems. However, these
changes repositioned manufacturing activities and
by extension, changed the behavior patterns of
manufacturing costs. Researches in the field of
management accounting began to the fact that
© JournalsBank.com (2015).
accounting as well as its development starting from
1700 to this present date. Towards the first half of
the twentieth century, there was great improvement
on the costing accounting tools used by the early
industries of the nineteenth century. During this
period the development of cost and management
accounting was not very fast. In other words, it was
somewhat slow irrespective of the fact that the
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European Journal of Humanities and Social Sciences Vol. 34, No.1, 2015
manufacturing
environment
experienced
some
information. The period of the 1950s and beyond
drastic changes beginning from the nineteenth
witnessed new researches aimed at providing new
century. The period was characterized by the use of
decision-making tools for managers. The researches
cost information for inventory valuation and
during this period mainly focused on profit
financial reporting with little or no emphasis on
maximizing models like linear programming, cost
decision making.
variance investigation models, transfer pricing,
However, the situation improved drastically in the
1950s as there were publications of books that
focused on the decision making role of cost
© JournalsBank.com (2015).
performance
evaluation
and
opportunity
cost
models. All these models were based on neoclassical economic theory (Ashton et al. 1991;
Scapens, 1991).
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