Kelly & Pratt

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Kelly & Pratt (1992) – Purposes and paradigms of management accounting: beyond economic reductionism

The paper suggests that management accounting is seen as fulfilling a multiplicity of purposes which can only be understood by analysing the actions of the management accounting actors involved.

Management accounting grew out of cost accounting around 1950s. It was grounded in the neo-classical economical theory of the firm: if each firm acts to maximize its profitability, then the profitability of the total economy will be maximized.

Traditional management accounting theory has accepted that there is a concrete world full of resources. The role of the management accounting is to aid rational economic decision making. Technical progress will bring perfection to rational decision making.

Kaplan et al. argue that management accounting has not progressed. Need to return to pure applications of basic principles in order for management accounting practitioners to regain the high ground.

Simon: goes on the attachek of neo-classical economics; people are rational profit-mazimizing decision makers. The growing seperation between ownership and management has directed attention to the motivation of managers and the adequacy of the profit maximization assumptions. Bounded rationality: business environment is too complex to understand totally so bounderies around decision models are drawn. Individuals are unable to understand the world fully, identify all possible options and process all data.

Approaches to study management accounting:

1. Decision making approach:
People are not rational, nor have always clearly defined goals or complete knowledge. March & Olsen: ‘garbage can’ model. Decisions are made when the 4 streams of garbage come together within the organization in the right mix. The 4 factors: problems, solutions, participants and choice opportunities. As problems and solutions are often independetn, this results in...
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