on 13 August 1998
For those management accountants who feel less than totally appreciated (the real ones will know this to be a common feeling) then this book shows how financial accounting usurped management accounting when the bean counters went looking for shareholders and needed to tell less than the truth about what was going on inside their firms.
If auditors are just hookers with a degree, then financial accountants are then just politicians without a cause - you cannot run a business on late and averaged data from the financial perspective.
This book reminds us that knowing what things cost to make and cost to sell is what keeps a firm on the black ink side of the ledger.
Worth a read.
on 10 September 1997
This is a small book which puts forward the idea that we must return to a better use of product cost data to make decisions. The authors review the literature going back to the first industries in the 1700's that used cost data in a managerial way. The work quotes heavily A. Chandler, J.M. Clark and Vatter for their contributions. It then reformulates their idea's and other historical data to come to the author's conclusion. In summary, it is well done for those interested in the subject and have an appreciation for business history.
This is one of those books that is, I suspect, more referred to than actually read, being a precursor to one of the author’s subsequent extensive work on “The Balanced Scorecard” and a general reassessment of the role of management accounting that continues today.
The authors’ hypothesis, stated in the first sentence, was that management accounting information of the day (1986) was “too late, too aggregated and too distorted to be relevant for managers planning and control decisions”. They proceed with a history of the development of management accounting techniques from the early nineteenth century, and business enterprises in Britain and the US became much bigger and more integrated than they had been. It’s quite fascinating to see how quite sophisticated techniques to support management control and decision making were developed unencumbered by the need for rigorous financial accounts to be presented to shareholders and the outside world. Johnson and Kaplan proceed to show how, as those external reporting requirements grew management accounting was compromised by the need to make use of data collected for this different (and often, the authors suggest, futile) purpose.
My particular interest was to learn what they had to say about “nonfinancial indicators”, which is one of the foundation of the balanced scorecard and other recent strategic management accounting techniques; the section actually devoted to these was actually quite short – a half dozen pages at the end. Nevertheless, I am delighted to have added this seminal work to my library, and (assuming you are interested in the development of accountancy!), if you get the chance to pick up a second hand copy yourself I’d snap it up!