MANAGERIAL

ACCOUNTING
Assignment # 1

STRATEGIC MANAGEMENT ACCOUNTING

A MESSIAH FOR
MANAGEMENT ACCOUNTING?

Submitted to:
Dr. Imtiaz Badshah

JUNAID TARIQ (10411)

MBA 2K14 (B)

STRATEGIC MANAGEMENT ACCOUNTING A MESSIAH

FOR
MANAGEMENT ACCOUNTING?
This paper is taken from July 2011 edition of Australian Journal of Business
and Management Research. It is written by Haider Shah, Ali Malik and
Muhammad Shukat Ali. The title of the paper is mentioned above. This
paper has five parts in which different aspects are discussed. The
summary of all the parts is discussed below.

Summary:
According to authors, when managerial accounting was introduced it was
viewed as blessing for the managers of the big organizations because of
its promise to assist managers in decision making. But managerial
accounting has failed to fulfil its promises because there is still a big room
for improvement in this discipline and in this situation Strategic
managerial accounting is emerged as messiah. It promises to be more
accurate, future oriented and more useful for the managers. Managerial
accounting involves using information for decision making, planning and
controlling at all levels. In this paper authors discussed about use of
managerial accounting and its limitations. After that authors discussed
about strategic managerial accounting that how it satisfied the need the
managerial accounting and how it contributes more to the managers
effective decision making.
Management accounting (MA) was developed in the era of World War 1,
purpose of this discipline was to measure and capture the economic
activity and then use it for the purpose of decision making in the
organization. MA was mainly developed from the principles of cost
accounting which only focuses on the numbers and costs. In the beginning
the discipline of MA was useful for the managers but as the production
techniques and technology gets better, limitations of MA also starts
emerging. The accountants and managers were extremely dissatisfied

with MA rules and procedures because it was not that much useful in
modern era. The authors of this paper identified three main limitations of
MA:
1. MA is derived from financial and cost accounting thats why it has
failed to fulfil the requirements of modern decision making process.
2. It cannot provide customized information to managers for decision
making.
3. Due to some principles of financial accounting which are applied in
MA, makes it less reliable for the managers for internal use.
Authors conclude that after all the above discussion it is visible that MA is
failed to fulfil its promises and there is need for something to be done in
this regard.
The question which is to be answer in this research paper is Can
Strategic Management Accounting (SMA) become a messiah for the
management accounting discipline?
According to authors SMA gives a more efficiency in the decision making
process because unlike MA, it focus on competitive based decision
making. It enables managers to have a greater insight on the competitors
business moves and procedures. Authors identified 10 key differences in
MA and SMA which make it useable in modern business environment. SMA
has a toolbox of many attributes which makes this discipline the next big
thing in accounting world. The toolbox includes attribute costing,
competitor cost assessment, balance score card, strategic costing, value
chain costing and activity base costing.
SMA has gained a greater publicity in recent years in the articles of
scholars and different journals but it is yet to be seen that wither it will
fulfil its promises in organization environment or not. Some of the scholars
has tested it in some organizations and given them great results but
managers are still reluctant to learn this discipline as they do not know
about what luxury it provide to them. There is need of research to be done
on the empirical evidences of usefulness of SMA. Only empirical evidences
can tell either it will be useful or not.