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Traditional Management Accounting And Innovation Management Accounting

1756 words - 7 pages

It is not difficult to find current business environment tending to be very competitive, with higher degree of information transparency, customer loyalty. The companies are competing not only in terms of product price and quality but also on services such as delivery, reliability and customer satisfaction. Corporate social responsibility and corporate governance is shifting its perspective from the producer to that of the consumer for understanding the key elements involved in a better shopping experience and forms an integral part of non financial measurement of quality expectations. This the business enviroment move from focus on product side to more on customer side which measured by the non-financial measurement. Implementation of the non-financial measures, together with the financial measures can be done by using strategy map and balanced scorecard system, which result to the balancing of short and long-term aims in all three aspects of the company performance - customer, internal business process and learning & innovation. But with these changes ,traditonal mangement accounting considered to be too limited to generate relevant information for the long-term development . (Drury, 2008)This essay will evaluate the traditonal management accounting in comparison with the new mangement techique.It is criticized that the traditional management accounting is not fit for the current business environment that generate information to meet the three goals of management accounting. The first objective is to allocate costs between goods sold and inventories for internal and external profit reporting. The second goals is to provide relevant information for the manager to make decisions. Finally, it is essential for planning ,control and performance measurement information. (www1) Secondly, traditional accounting is short-sighted, only emphasizing in the short-run. Traditional management accounts for focus only on the control of working capital. This evaluation of the investment program is limited to financial benefits from the perspective of the above analysis. Enterprise business performance is also reflected in the current period profits only, solely paying attention to the pursuit of enterprise short-term profit maximization. (Drury,2008)Thirdly, Traditional management accounting in the formulation of operational objectives, decision-making analysis and cost control, tending to focus only within the enterprise environment and existing products, lowering the throttle and so on, their immediate concern is the pursuit of short-term profit maximization, neglecting new product design and development, ignoring changes in the external environment within the enterprise environment, as well as non-monetary measures of factors, neglecting the pursuit of a higher degree of long-term integrated value to maximize shareholder value. For example, in cost of quality issues, its best quality and cost concept Naishi refers to internal and external loss prevention...

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