The History and Development of Accounting
CHAPTER 2
THE HISTORY AND DEVELOPMENT OF MANAGEMENT
ACCOUNTING
2.1
INTRODUCTION
The previous chapter defined the research problem and stated the main hypothesis for the study, namely that management accountants may not be able to contribute fully to the strategic management process in the future, as the skills required and displayed by management accountants do not meet the needs of the changing business environment. This hypothesis also indicates a growing gap between current tertiary management accounting education and the future requirements of management accounting practice. A thorough understanding of the history and development of management accounting is required before the gap between education and practice can be investigated. Moreover, knowledge of the history of management accounting will facilitate an understanding of the future of this profession. As Plato said in 370 AD:
… and thus, the tale (history) was preserved, and did not perish; and it may also preserve us, if we will listen to its warnings; in which case we shall pass prosperously across the river … and during the journey of a thousand years which we have described we may never cease to prosper
(Plato 370AD)
This chapter firstly highlights the difference as well as the interdependence between management accounting and financial accounting. The focus then shifts to historical developments in both these fields. Thirdly, the professional status of the management accountant is addressed as the study is relevant to practising management accountants. Finally, as the research for this study revolves around
10
the current status of management accounting in South Africa, its history and development -- although limited -- will be investigated.
2.2
INTERDEPENDENCE BETWEEN FINANCIAL ACCOUNTING AND
MANAGEMENT ACCOUNTING
Although financial accounting and management accounting constitute two different fields of study, the one cannot exist without the
THE HISTORY AND DEVELOPMENT OF MANAGEMENT
ACCOUNTING
2.1
INTRODUCTION
The previous chapter defined the research problem and stated the main hypothesis for the study, namely that management accountants may not be able to contribute fully to the strategic management process in the future, as the skills required and displayed by management accountants do not meet the needs of the changing business environment. This hypothesis also indicates a growing gap between current tertiary management accounting education and the future requirements of management accounting practice. A thorough understanding of the history and development of management accounting is required before the gap between education and practice can be investigated. Moreover, knowledge of the history of management accounting will facilitate an understanding of the future of this profession. As Plato said in 370 AD:
… and thus, the tale (history) was preserved, and did not perish; and it may also preserve us, if we will listen to its warnings; in which case we shall pass prosperously across the river … and during the journey of a thousand years which we have described we may never cease to prosper
(Plato 370AD)
This chapter firstly highlights the difference as well as the interdependence between management accounting and financial accounting. The focus then shifts to historical developments in both these fields. Thirdly, the professional status of the management accountant is addressed as the study is relevant to practising management accountants. Finally, as the research for this study revolves around
10
the current status of management accounting in South Africa, its history and development -- although limited -- will be investigated.
2.2
INTERDEPENDENCE BETWEEN FINANCIAL ACCOUNTING AND
MANAGEMENT ACCOUNTING
Although financial accounting and management accounting constitute two different fields of study, the one cannot exist without the
References: online (2005:2) defines management accounting as the provision of financial data and advice to a company for use in the organisation Lloyd (2002:1) elaborates on the importance of historical information when he states: