Managerial Accounting Essay

Chapter 2

Literature review

“The Changing Role of Managerial Accounting and the Managerial Accounting Profession in Romania”

Managerial accounting has historical antecedents that stretch back to the beginning of the 1900s. Whether it was called cost accounting, or industrial accounting, or administrative accounting it is certain that concerns regarding production cost calculation, expenses’ classification and analysis, resource consumption administration, and pre and post cost calculations, have existed since the beginning of the 90s (Cardos & Cardos, 2010).

Simon (1978) conducted a study about the role managerial accounting. In his opinion managers have three major expectations regarding to management accounting roles: scorekeeping (capturing,

The current social and business environments, sophisticated information systems development, and structural changes and innovations induced companies to implement profound changes in their management instruments, their business-management models, and their methods of managerial accounting (Guerreiro et al, 2006). Literature in this field (Ribeiro & Scapens, 2006; Jarvenpaa, 2007; Byrne & Pierce, 2007; Jarvenpaa, 2009) has pointed out the changing role of managerial accounting roles, from being a scorekeeper to being a business analyst and an active advisor of management in the decision making process. In their point of view managerial accounting has become more business oriented, involving relevant accounting systems, personal and organizational desire, personal competencies, and overall business knowledge. Moreover, new managerial accounting techniques such as strategic cost management, activity based costing, customer profitability analysis, balanced scorecard, target costing, modern financial and operational control systems and software packages enhanced the business orientation of managerial accounting (Cardos & Cardos,

To reach the necessary information, a new information system should be created. In the same study, Hayes found that this additional non-financial data will be significant in supporting decision making by managers. As a result, MAS has developed to include traditional non-financial data focusing on predictive information and functional areas to aid managers to make more informed decisions (Mia & Chenhall, 1994).

Burns (1968) hypothesized that if accounting information is considered as irrelevant for the set of decisions to be made, then accounting information will not affect decisions, on the other hand, if accounting information is considered as relevant to the set of decisions to be made, then accounting information may affect decisions. Burns made the assumptions that "an individual conceives accounting information as either a goal or at a point on a continuum on which accounting varies from a perfect measure to an imperfect one." After his assumptions, Burns hypothesized: "the conceptions of accounting held by a decision-maker will affect his selection of a decision rule to be used in reaching a set of decisions". He explained his hypothesis as