Is traditional management accounting the same as management accounting? If not, what is the difference?

Traditional management accounting due to outdated concepts, backward methods, the use of accounting practice has greater limitations, has not adapted to the requirements of modern management.

Modern management accounting has played a positive role in cost and human-centered management, in decision-making analysis and evaluation.

Characteristics of modern management accounting

(I) Cost management

In the era of knowledge-based economy, the value of an enterprise's products will depend more on the information and knowledge contained in the products, which are both technological and market-oriented. Technological innovation and product development, as well as the mastery of the market in the enterprise value-added accounted for a large part of the manufacturing value-added accounted for a relatively small part. In order to ensure long-term competitive advantage, enterprises have to invest heavily in information and knowledge development. Under such circumstances, the center of gravity of cost management should be gradually shifted from production and manufacturing costs to product development costs, and from cost control to cost planning. How to utilize all kinds of resources, so that high knowledge into high intelligence, high intelligence into a unique strategy, ideas, and then form a variety of new design, new development, is the most concerned about the new era of enterprises.

(2) Decision analysis and evaluation

The center of gravity of management is decision-making. From the decision-making analysis, traditional management accounting in decision-making analysis focus on the use of the model and the results of the calculation in the first place, while ignoring the use of the model of the premise of the analysis and the results of the calculation of the number of processes, so as to affect the accuracy of the accounting information. It should be said that the process of analysis is more important than the calculation of results. In the analysis of economic behavior, as the basis for the calculation of the number of correct, determines the correctness of the results of the calculation; as a model of the use of the existence of preconditions, determines the model can be used or not.

From the aspect of decision-making evaluation criteria, at present, the decision-making evaluation criteria used in management accounting are mainly profit maximization (cost minimization) and net cash flow maximization. These profit, cost and cash criteria are the product of a particular era. From the viewpoint of enterprise management objectives, the above decision-making criteria are outdated, or at least very incomplete. the central theme of management in the 21st century is the assessment of enterprise value under uncertain conditions, and therefore a variety of factors that are difficult or impossible to measure should also be taken into account in a comprehensive manner. For example, in a knowledge-based economy, the evaluation of an enterprise's investment program should focus on whether or not it will bring about the accumulation of human resources and the improvement of various technologies, rather than focusing solely on the amount of money that can be saved in the short term.

(3) Human-centered management

Adhering to the human-centered approach and fully tapping and utilizing human capital will become the first consideration in enterprise management. In connection with this, management accounting in the process of forecasting, decision-making, planning and control, must provide accounting information and the management of people combined.

Specifically: (1) human behavior research, the use of effective incentives and performance appraisal program, stimulate human subjective initiative and behavioral enthusiasm, so that people in the beginning of the action before the beginning of the positive behavioral awareness, in the behavioral process can do conscious conscious control. (2) Determination of the value and cost of human resources. In order to implement specific human resources management, it is necessary to quantify the value and cost of human resources, because the quantified human resources data will help the operation of the management measures. (3) Investment analysis of human resources. Human resources, like physical resources, are capable of obtaining a certain amount of income for the enterprise in the future (especially in the knowledge-based economy), but without a scientific feasibility analysis, investment mistakes can occur, causing losses to the enterprise.

In addition, the analysis and evaluation of human resources investment also helps enterprises to take into account the human factor in the total capital budget, so that the allocation of enterprise funds more effectively, to overcome the past managers to pursue short-term interests without paying attention to the human investment in the short-term behavior.

Limitations of traditional management accounting

(1) Lack of a set of rigorous and effective theory

Management accounting has always lacked a solid theoretical foundation, both in China and in the West, the study of management accounting has always favored methodological research, and did not pay attention to the study of theoretical structure. For example, there have been few in-depth and systematic studies on the basic categories of management accounting objectives, assumptions, principles, methods and their interconnections, which have not yet resulted in the formation of a rigorous theoretical system for management accounting. The paucity of theories has led to a long-term lack of theoretical guidance for management accounting practices, thus seriously restricting the role of management accounting. On the other hand, although some research results of information theory, cybernetics, system theory and behavioral science have been successively introduced into management accounting, expanding the scope of application of management accounting, management accounting has not yet been able to comprehensively and adequately digest the scientific results originated from these different disciplines, and people have only made limited amendments to some assumptions on management accounting based on these results, some of which are still at the stage of qualitative analysis and lack of application. Some of them are still at the stage of qualitative analysis and lack application value.

(2) The application in practice has greater limitations

Since the theory of traditional management accounting is based on the establishment of a specific economic environment, it determines the quantitative models and assumptions in the changing realities of economic life, there are many can not be established, it is difficult for people to use these theories and models to solve the actual problem. For example, the quantitative analysis, cost-effective analysis and other models used to establish and use by many conditions, it must be assumed that: the unit price is a constant; unit price and sales volume are independent of each other; the total cost line is a straight line. However, in the increasingly competitive market environment, there are many uncertainties, and the reality of economic activities is often complex and variable, the traditional management accounting methods appear to be more and more lagging behind, thus making it difficult to implement and promote in the enterprise management activities.

(C) the concept of obsolete, do not adapt to the requirements of modern management

The traditional management accounting methods based on some of the concepts with the passage of time, has become obsolete and outdated. For example, on the issue of inventory, it allows the existence of inventory, and advocates the optimal control of inventory by calculating the optimal economic batch size, but this concept will give managers an illusion that as long as the economic batch size is strictly in accordance with the procurement, you can reduce costs, so in practice they tend to purchase large quantities in order to obtain quantity discounts, which results in a large backlog of raw materials and a large amount of funds are occupied.

(D) short-sightedness, focusing only on immediate interests

Traditional management accounting in the formulation of business objectives, decision-making analysis and cost control, often focusing only on the internal environment and existing products, such as cost reduction and cost-saving issues, which are concerned with the immediate interests of the pursuit of short-term profit maximization, while ignoring the design and development of new products, and neglecting the impact of changes in the external environment on the internal environment, as well as non-monetary measurement factors. Neglecting the impact of changes in the external environment on the enterprise's internal environment and the impact of non-monetary measurement factors, and neglecting the pursuit of long-term comprehensive degree of higher shareholder value maximization. For example, on the issue of quality cost, the concept of optimal quality cost refers to the level of quality that minimizes the sum of internal and external loss costs and the costs of prevention and inspection, and this is taken as the overall objective of quality cost control. However, this only applies to the enterprise's current production and sales situation, according to which may receive the short-term cost of the lowest, maximum profit effect. However, product quality is the life of the enterprise, in the case of very fierce competition, due to the product quality problems exist, is likely to lead to the enterprise in a passive position, affecting the future sales of the Group's series of products, and may even be eliminated from the game.

(E) backward methods, information distortion

Traditional management accounting cost accounting methods do in a certain period of time to strengthen the internal management of enterprises, improve economic efficiency to play a positive role in making an important contribution. However, with the development of contemporary high-tech and its wide range of applications in production, some of the methods of traditional management accounting has been unable to keep pace with the times. For example, the allocation of manufacturing costs over the decades has been the use of labor hours as a standard to be implemented, however, in the electronic numerical control machine tools and robots, computer-aided design and flexible manufacturing systems widely used under the computer-integrated manufacturing system today, the direct cost of labor has been reduced dramatically, a high degree of automation of equipment excludes the need for ordinary machine operators, and replaced by equipment can be debugging and normal maintenance of skilled workers, so the unit is not in line with the times. Maintenance of skilled workers, so the direct labor costs per unit of output has become negligible, it can be said that the traditional sense of direct labor costs almost zero.