Costing in a New Enterprise Environment Essay

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The rising recognition of existing and emerging accounting theories indicates that accounting information is fundamental in the field of management. Consequently, managerial accounting is a significant necessity for it enables managers to make informed decisions. The current economic outlook exerts pressure on managerial accounting practices because companies are expected to perform exceptionally amidst increased global competitiveness. However, though there has been a radical paradigm shift in all areas of managerial accounting practices, Gupta and Gunasekaran (2005) emphasize that costing should be given the utmost and immediate attention. Consequently, given this critical role of cost accounting in decision making, resource allocation and operation control, there is an urgent need to explore managerial accounting challenges emerging in the 21st century.

Managerial accounting has become a significant necessity because it provides managers with accurate cost information that facilitates decision-making. The need for accurate cost information has become critical in 21st century managerial accounting because firms are compelled to alter old practices in order to succeed in a globalized market (Gupta & Gunasekaran, 2005). Against this background, the researchers sought to establish the various managerial accounting challenges both researchers and practitioners face based on the premise that accurate cost accounting information is needed during the decision-making process.

The 21st century brings forth new challenges to managerial accounting practices. Accordingly, there is a need for accounting professionals to alter their mindset and skills to embrace the changing business environment. Otherwise, they risk being redundant. On this note, Gupta and Gunasekaran (2005) assert that researchers in managerial accounting have failed to recognize that the traditional management systems are irrelevant in the new era, and they are still utilizing redundant research designs. This ignorance is an immense challenge for it implies that research findings are not adequate to aid practitioners in making accurate costing decisions.

Bearing in mind that cost accounting practices have evolved over time, managerial accounting researchers and professionals today are likely to face various challenges that were absent in yesteryears. For instance, prior to developing a value-based costing system, they have to identify the critical areas that are likely to influence the overall outcome of the business. Secondly, both researchers and practitioners need to develop practical performance measures and metrics that would facilitate the future evaluation of strategies alignment at different levels. In addition, the performance measures should enable the managerial stakeholders to evaluate the return-on-knowledge capital. Since the development of information systems has become crucial in the 21st century, managerial accounting stakeholder’s ought to develop effective measures to aid in the evaluation of information systems’ productivity. Evidently, e-logistics will become a necessary application in managerial accounting. Hence, the need to develop effective measures to evaluate the suitability of the different e-logistics designs cannot be overemphasized.

In conclusion, the research done by Gupta and Gunasekaran (2005) underlines that the ongoing evolution of manufacturing enterprises presupposes parallel changes in performance and cost measures. However, this task is not as straightforward as stated seeing that managerial accounting researchers and practitioners have to overcome the various challenges whilst developing fresh cost and performance measures since they are required to consider both the supply-chain and virtual enterprise as they are essential in the new economy. Accordingly, though every principle of managerial accounting is necessary for organizational performance management, effective cost accounting is central given that proper resources management promotes the organization’s excellence.

Reference

Gupta, K. M. & Gunasekaran, A. (2005). Costing In a New Enterprise Environment: A Challenge for Managerial Accounting Researchers and Practitioners. Managerial Auditing Journal, 20(4), 337–353.

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IvyPanda. 2022. "Costing in a New Enterprise Environment." May 6, 2022. https://ivypanda.com/essays/costing-in-a-new-enterprise-environment/.

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