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Journal of Management Research and Analysis

In defence of traditional cost and management accounting

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Author Details: R. K. Srivastava

Volume : 5

Issue : 1

Online ISSN : 2394-2770

Print ISSN : 2394-2762

Article First Page : 10

Article End Page : 14


The theory and practise of traditional cost and management accounting has been under severe criticism in recent years. Professionals working in industry and academia world over have critically debated over traditional concept’s relevance for cost control, performance appraisal, product costing/pricing and decision-making purposes. Critics contend that in a world class manufacturing environment (WCM) characterised by concepts of just in time (JIT) and total quality management (TQM), traditional costing becomes redundant as a performance measurement, decision making and cost control tool (Johnson,1987). They argue that traditional costing induces dysfunctional behaviour amongst employees because of fear of adverse variances being attributed to them (Birnberg. 1992) and also promotes the concept of cost plus pricing (Kaplan, 1984) which is not relevant in the modern day dynamics where selling prices are decided by market forces. Concepts as target costing and activity based costing are thought of to be more appropriate in today’s manufacturing environment.
The impact of these criticisms has had a profound impact on the way this subject is perceived, be it academia or the industry or professional bodies regulating the profession of accounting. Arguments in favour of traditional costing still remain , however, the winds of changes appear continuous .A long and time tested language is being pushed into oblivion, being replaced with tools and techniques of the modern era which have and are being brought forward as betterments over the so called limitations of the traditional  structure.
The objective of this paper is two fold;
1. To identify various limitations attributed to traditional cost and management accounting in modern competitive environment.
To critically examine these various limitations in terms of both assumptions and objectives attributed by critics to the functional domain of cost and management accountancy.

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