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Accounting is the method by which an organization measures the use of assets and liabilities against money. It is an indispensable tool and prerequisite to modern day capitalism.[1] Double book entry accounting is a method by which every economic action must affect two accounts so that they balance in the equation:
Assets - Liabilities = Equity

Recent Developments

Modern day capital accounting in the United States is under the standard Generally Accepted Accounting Principles (GAAP). The Securities and Exchange Commission (SEC) has proposed a movement to international financial reporting standards or IFRS.

Economic calculation directs the actions of individual business persons. "Economic logic prevails over the technological," says Schumpeter.[2] The transition to a world standard of accounting may impart some benefits, for example: " more efficient functioning of capital markets and a lower cost of capital for the economy as a whole." [3] In sum, the method of economic calculation has importance in economic analysis.

Specific concepts

This article uses content from the Wikipedia article on Management accounting under the terms of the CC-by-SA 3.0 license.

Cost accounting

Cost accounting is a central element of managerial accounting.

Grenzplankostenrechnung (GPK)

Grenzplankostenrechnung is a German costing methodology, developed in the late 1940s and 1950s, designed to provide a consistent and accurate application of how managerial costs are calculated and assigned to a product or service. The term Grenzplankostenrechnung, often referred to as GPK, has best been translated as either Marginal Planned Cost Accounting[4] or Flexible Analytic Cost Planning and Accounting.[5]

The origins of GPK are credited to Hans Georg Plaut, an automotive engineer and Wolfgang Kilger, an academic, working towards the mutual goal of identifying and delivering a sustained methodology designed to correct and enhance cost accounting information. GPK is published in cost accounting textbooks, notably Flexible Plankostenrechnung und Deckungsbeitragsrechnung[6] and taught at German-speaking universities today.

Lean accounting (accounting for lean enterprise)

Main article: Lean accounting

In the mid- to late-1990s several books were written about accounting in the lean enterprise (companies implementing elements of the Toyota Production System). The term lean accounting was coined during that period. These books contest that traditional accounting methods are better suited for mass production and do not support or measure good business practices in just-in-time manufacturing and services. The movement reached a tipping point during the 2005 Lean Accounting Summit in Dearborn, MI. 320 individuals attended and discussed the merits of a new approach to accounting in the lean enterprise. 520 individuals attended the 2nd annual conference in 2006.

Resource consumption accounting (RCA)

Resource Consumption Accounting (RCA) is formally defined as a dynamic, fully integrated, principle-based, and comprehensive management accounting approach that provides managers with decision support information for enterprise optimization. RCA emerged as a management accounting approach around 2000 and was subsequently developed at CAM-I the Consortium for Advanced Manufacturing–International, in a Cost Management Section RCA interest group in December 2001.

Throughput accounting

Main article: Throughput accounting

The most significant recent direction in managerial accounting is throughput accounting; which recognizes the interdependencies of modern production processes. For any given product, customer or supplier, it is a tool to measure the contribution per unit of constrained resource.

Transfer pricing

Main article: Transfer pricing

Management accounting is an applied discipline used in various industries. The specific functions and principles followed can vary based on the industry. Management accounting principles in banking are specialized but do have some common fundamental concepts used whether the industry is manufacturing based or service oriented. For example, transfer pricing is a concept used in manufacturing but is also applied in banking. It is a fundamental principle used in assigning value and revenue attribution to the various business units. Essentially, transfer pricing in banking is the method of assigning the interest rate risk of the bank to the various funding sources and uses of the enterprise. Thus, the bank's corporate treasury department will assign funding charges to the business units for their use of the bank's resources when they make loans to clients. The treasury department will also assign funding credit to business units who bring in deposits (resources) to the bank. Although the funds transfer pricing process is primarily applicable to the loans and deposits of the various banking units, this proactive is applied to all assets and liabilities of the business segment. Once transfer pricing is applied and any other management accounting entries or adjustments are posted to the ledger (which are usually memo accounts and are not included in the legal entity results), the business units are able to produce segment financial results which are used by both internal and external users to evaluate performance.

Resources and continuous learning

There are a variety of ways to keep current and continue to build one's knowledge base in the field of management accounting. Certified Management Accountants (CMAs) are required to achieve continuing education hours every year, similar to a Certified Public Accountant. A company may also have research and training materials available for use in a corporate owned library. This is more common in "Fortune 500" companies who have the resources to fund this type of training medium.

There are also numerous journals, on-line articles and blogs available. The journal Cost Management (Template:ISSN)[7] and the Institute of Management Accounting (IMA) site are sources which includes Management Accounting Quarterly] and Strategic Finance publications. Indeed, management accounting is needed in an organization.

Related qualifications

There are several related professional qualifications and certifications in the field of accountancy including:


  1. Max Weber, General Economic History, trans. Frank H. Knight (New York, NY: Collier Books, 1961) 208-209
  2. Joseph Schumpeter, The Theory of Economic Development, trans. Redvers Opie (Cambridge, Massachusetts: Harvard University Press, 1961) 14
  3. Statement of Financial Accounting Concepts, No. 8 [1] QC37
  4. Friedl, Gunther; Hans-Ulrich Kupper and Burkhard Pedell (2005). "Relevance Added: Combining ABC with German Cost Accounting". Strategic Finance (June): 56–61. 
  5. Sharman, Paul A. (2003). "Bring On German Cost Accounting". Strategic Finance (December): 2–9. 
  6. Kilger, Wolfgang (2002). Flexible Plankostenrechnung und Deckungsbeitragsrechnung. Updated by Kurt Vikas and Jochen Pampel (12th ed.). Wiesbaden,Germany: Gabler GmbH. 
  7. "Cost Management". Thomson Reuters. 2011. Retrieved November 12, 2011.