How it All Began
Management's use of accounting data sprung from the early 1900's cost accounting initiatives, which were introduced by the principles of scientific management.
However, in light of the present-day developments in managerial approach, a distinction between managerial and cost accounting concepts should be established. The former pertains to financial data gathering and its analysis. It involves the generation of reports, which serve as tools used in various operational activities of business organizations. Cost accounting, on the other hand, represents the tools, approaches and methodologies being used to generate key financial data for production costs.
Later developments after World War II came to include not only the reports about variance analysis between budgeted manufacturing costs and actual expenditures but also information about backlogs on sales orders, and inventory management in relation to customers’ demands. The review of internal resources and their capacity to provide such demands also came to the fore.
Let us first delve into the evolution and development of managerial accounting functions, and how the concept came to cover broader areas of performance measurement. The following articles have been rounded-up to give readers a more in-depth view of the circumstances that gave birth to the concept of traditional managerial accounting: