Today economic activities are complex and diverse. The market is wide and competition becomes cut-throat. Hence the mere ascertainment of cost is of little use, as provided by cost accounting. Besides, the modern management is interested in not only knowing the cost of production, but also in controlling the costs. It is possible only if the management is in a position to determine financial cost, managerial performance, planning etc., and this gave birth to “Management Accounting”. Hence, new techniques were invented to present the accounts periodically, not necessarily at the end of the year, before the management. Such accounts should be prepared in such a way that the results could be easily compared with the budgeted data and efforts be made to exercise control. Such new techniques were termed as “Management Accounting”.
The other day I was discussing the scope of management accounting with the director of a highly reputed business school. The context was discussion of a theme of a conference on management accounting. The director was trying to convince me that the scope of the profession cannot be as wide as I was presenting. He ultimately came to the conclusion that if I was right then Indian Institute Managements should be renamed as Indian Institute of Management Accounting. This small episode speaks volumes. The evolution of management accounting has gone unnoticed in academia in India. Except those who research or teach in the area of management accounting, others have no understanding on how the role of management accounting has changed from cost collection and analysis to active participation in formulation and execution of strategy. I guess there are two reasons for the same. First, there is no culture of systematic field studies in India to capture the evolution of management accounting. This is due to lack of initiatives on the part of the accounting bodies and the academia and reluctance on the part of... [continues]
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