Introduction: Does the management accounting innovation of any importance to the modern day organization? The management accounting has been undergoing innovations and inventions that have formed the core themes that drive the operations of the modern organisations. This paper would clearly analyse through which the management accounting innovation have formed the core themes for the operation of the modern day organization. This paper would achieve this through looking at the three most successful management accounting innovations that have for a long time played a crucial role in the modern day organization; the analysis of the activity-based costing (ABC), the analysis of the balanced scorecard (BSC), the economic value added (EVA) and the relationship between the three main types of management accounting innovations (Hopper 2007). This paper would later look at the interface between the management accounting and the informational technology.
Information technology has played a very important role in the operation and management of the modern day organizations. Later the paper would look give a summary of the important information covered in this paper in the conclusion part. Management Accounting Innovations: Many new models of management accounting have been introduced in the past few years with an intention of making the management of accounting effective and easy.
The acronyms that are used in the accounting field to represent the management accounting innovations are; ABC and EVA and sometimes they are referred to by catchy names which attract attention such as intellectual capital and balanced scorecard. The main sources of the management accounting innovations were as a result of search for solution for the existing problems by the modern companies. These new solutions which came as innovations were to be used for planning, organizational control and decision-making purposes (Plasmans, 2006).
The research carried out recently provided a reason as to why some innovations spread more successfully than others. Below are the different management accounting innovations that have successfully diffused through the modern world; Activity-Based Costing (ABC): This is a management accounting innovation that was introduced in the late 1980s. The main idea of this innovation was to introduce bases of new allocation of the indirect costs which include drivers that are non-volume related or those costs that are inversely proportional to their volumes.
The main reason for the introduction of this rhetoric was to come up with base allocations that were typically different to the traditional allocation which has allocation bases that were directly proportional as they had direct labour and direct material. In the first phase, the selection of the base allocation using this concept was the key design for most organizations. Later on, the concept was further improved to adapt a multidimensional analysis of profitability. Objectives that were more descriptive were introduced which included; segments for consumer market and channels of distribution.
These additional parts formed a continuous process which was regarded as a cost hierarchy continuation (Vuskane 2010). An additional development feature was the initiative that aimed at separating the cost of the capacity of the unused from the activities. A best example is whereby the ABC was traditionally regarded as a model of resource usage. Based on the ABC literature, the phrase, “traditional costing” is used to refer to the systems of costing that are unsophisticated.