Essay on "Management Accounting Systems and Organizational Structure"

Essay 4 pages (1127 words) Sources: 5

[EXCERPT] . . . .

Management Accounting Systems & Org Structure

Management accounting, by its very nature, is intertwined with organizational structure. Whereas financial accounting is designed with structural consistency in mind to assist the external stakeholders from whom those statements are produced, management accounting's structural form is dictated more by the needs of the internal stakeholders. As firms devise their management accounting systems, those systems are inevitably influenced strongly by the underlying structures and beliefs of the firm itself. In that way, we can see how management theories, both structural and behavioral, can influence the development of management accounting systems within a given organization.

Bureaucracy is a structural construct developed to organize and operate complex organizations. Managerial accounting systems had their genesis in meeting the needs of the bureaucracy. Managers within the hierarchy had specific information needs, and throughout history often engaged in ad hoc managerial accounting practices in the course of their evaluation and decision-making.

These practices over time evolved into the more formal science of managerial accounting.

The structure of bureaucracy requires information that can be passed up and down the chain of command. For example, a subordinate manager needs financial data to support a project that must receive a series of approvals from higher managers. Ad hoc numbers do not easily translate, and the structure of financial accounting is geared too much towards scorekeeping. This lead directly to the formalization of managerial accounting systems, so that forward-looking information could not only be produced but could be disseminated in a consistent manner throughout the organization to all internal stakeholders, in the same way that financial statements are disseminated in a consistent manner to the external stakeholders.

Taylor's scientific management was crucial in the development of management accounting systems. By adapting the scientific method to management, and to production in particular, he had several key impacts on management accounting systems. The first was that scientific management required the sort of information that management accounting systems produces.

Managers were required to quantify things that had previously not been quantified. Taylor found for example that many techniques used were based on rules of thumb, rather than quantifiable evidence. The need for such quantification lead to rapid advances in managerial accounting systems. The systems were designed to uncover information and then present it in usable format.

Another way in which Taylor's scientific management led contributed to the development of management accounting systems was that the earliest practitioners of Taylorism, such as Henry Ford, shaped the direction of management accounting. The very types of information that management accounting systems produce today stemmed from the needs of scientific management. Taylor's work focused the study of management on narrow tasks, rather than just end results. This shifted the focus of managers towards inputs, in addition to outputs. Management accounting systems that developed to support Taylor's scientific management began to focus on the contributions of each part of the production process, in order to improve productivity at all levels, as opposed to merely focusing on the end results. Decision-making no longer flowed directly from the end result backwards, but began at the beginning of the process instead.

Fayol's administrative theory worked in somewhat the opposite manner of Taylor's scientific management, in that it addressed the workings of administration from the top down. This influenced the development of management accounting systems in that it promoted the idea that management's functions can be broken down… READ MORE

How to Reference "Management Accounting Systems and Organizational Structure" Essay in a Bibliography

Related Essays:

Issues in Designing an Appropriate Management Accounting System Essay

Management accounting systems are built to suit the particular needs of an organization's managers. The information provided and the manner in which it is provided should ideally be customized. This… read more

Essay 2 pages (678 words) Sources: 3 Style: Harvard Topic: Management / Organizations

---

Management Accounting This Memorandum Serves Essay

Management Accounting

This memorandum serves to show the benefits of management accounting and how the use of management accounting can clearly benefit the ongoing operations and profitability of Thai Corporation.… read more

Essay 5 pages (1595 words) Sources: 5 Style: Harvard Topic: Management / Organizations

---

Managing Information Systems Introduction in the Contemporary Case Study

Managing Information Systems Introduction

In the contemporary business environment, IS (information systems) have become the strategy weapons that organizations employ to achieve competitive advantages. With stiff competitions that organizations are… read more

Case Study 8 pages (2760 words) Sources: 10 Style: Harvard Topic: Management / Organizations

---

Managerial Accounting in Complex Organizations Research Proposal

Managerial Accounting in Complex Organizations

Management accounting involves activities like budgeting, costing, and much more which are focused to achieve organizational planning and control. Management accounting systems include both financial… read more

Research Proposal 5 pages (1574 words) Sources: 15 Style: Harvard Topic: Management / Organizations

---

Management and Organizational Structure Issues Research Proposal

Org Structure

A matrix structure has several advantages. With multiple reporting lines involved in decision-making and management, a company can function more quickly and share information better. For each company… read more

Research Proposal 5 pages (1276 words) Sources: 3 Style: APA Topic: Management / Organizations

---

View 100+ more related papers  >>