Describe the evalution in management accounting practice from

the year 1985 (stage 3) to the year 2000 onwards (stage 5)

Stage

2000

Transformati
on
Transformati
on

1990s

1885s

Transformatio
n
Transformatio
n

Reduction
of waste of
resources
in business
process

Creation of
value
through
effective
resources

Increase
accountability
through strategic
resource
management

Focus

Effectively, management accounting evolution can be clearly

distinguished into five recognizable stages. Each stage has been a
combination of the old and the new techniques.

Stage 3(1985-1995)
During this stage, the management focus on reduction of waste of
resources in business process. This is because global competition was
very stiff and companies worldwide looking for ways to minimise waste
and improving their value added activities. Beside, more process analysis
made together with cost management efforts. There are few techniques
used by companies such as Just In Time (JIT) and Activity-Based Costing
(ABC).

Stage 4(1995-2000)
In this stage, companies focused on the enhancing creation of value
through effective resources use. Basically managers tried to identify
factors of drivers that could potentially increase shareholders value and
eliminate non-value added activities. The techniques introduced in this
stage were Total Quality Management (TQM), Activity-Based Management
(ABM), Benchmarking and Reengineering.

Stage 5 (2000 onwards)

This stage was informally identified and categorised. However, during the
year 2000 or in the early 21 st century, the companies focused more on risk
management and increase accountability through strategic resource
management accounting.

Explain at least four factors that contribute to the evolution of

management accounting.

1. Global competition
Globalization has changed the environment surrounding
organizations operating in developing countries with an increase
in uncertainty, intensified industry competition and advanced
technology. Globalization brings in new technology and makes a
developing country open to greater competition. These changes
may affect the choice of management accounting practice in an
organization and also may result in the need for the firm to
reconsider its existing organizational design and strategies in
order to fit with the changing environment
2. Information and Communication Technology
The advance of technology through ICT and computerization has
also made management accounting information flow within
organizations in this country more useful, timely, accurate, and
relevant .Moreover, the introduction of fast information
technology within which firms in manufacturing industries in
Malaysia operate has greatly affected the technological
environment
3. Focus on the Customer
Research has identified technological advancement, active
competitors and demanding customers as potential predictors of
organizational and management accounting change. This aspect
is important because the management accounting system (MAS)
requirement can vary significantly depending on how well known
the causes of change in the external environment and their
indicators are to the organization.
4. Just In Time
Manufacturing technologies, such as the emergence of Just in
time (JIT), coupled with increased competition in a worldwide
market, has forced most organizations to compete on issues of
quality and timeliness, as well as cost. The problem is that it is
very difficult to use a debit/credit system to track organizational
performance regarding quality and time.