Birnberg, J. G. 1992. Managerial accounting: Yet another retrospective. Advances in Management Accounting (1): 1-19.

Summary by Ben Miele
Master of Accountancy Program
University of South Florida, Summer 2002

Anthony, Horngren, Shillinglaw and Flamholtz | History & Development Main Page

Where is Management Accounting? What shaped Management Accounting? What significance will Management Accounting hold for the future? There appears to be a link between economics and the behavioral aspects of management accounting that will direct future work, while the past three decades were influenced mostly by academic training and management’s response to employee behavior. The views of three authors, Anthony, Horngren, and Shillinglaw from papers written by each in 1989 provide background and the major differing aspects of managerial accounting. It is noted in the article that "each author views the whole" from only "the portion he or she knew" (p.2, par.3), meaning that only the author’s personal experience of the development of managerial accounting is described. Taken together, the authors’ experiences provide meaningful insight for the purpose, and future direction of managerial accounting.

In this article, Birnberg integrates the views of Anthony, Horngren, and Shillinglaw, as well as his own assessment of managerial accounting. Managerial accounting is viewed as being useful with purposes extending beyond determining the costs of inventories for financial statements. Managerial accounting thought is described using three research and application strands, the Management strand, the Economics strand, and the Behavioral strand. Each strand is aimed at assisting managers in using accounting data to better perform their jobs. However, the best way to achieve this goal differs among each strand.

The Management strand is stressed in both Anthony’s and Shillinglaw’s papers. Anthony views management practice as being the critical test of an idea. Anthony advocates "learning from good management practices, refining them," (p.4, par.5) and passing them along to all managers. Shillinglaw advocates research and greater use of our enhanced data processing capabilities. He believes that cost measurement should be based on activity-based accounting and strategic cost analysis.

Another example of the Management strand worth mentioning involves a study by Simon et al. (1954) concerning the controllership function. The description of the three functions of controllership (score keeping, attention directing, and problem solving) identified in the study are similar to the ideas of Method, Process, and Models found in Anthony’s paper. Cost and management accounting textbooks, including Horngren’s, used these categories for purposes of organizing material.

The emphasis of reporting costs for financial statements went from being a primary activity around 1950 to a routine aspect during the early 70’s when managerial accounting’s role shifted to one of planning and decision making. Likewise, the ordering of topic coverage in textbooks between 1950 and the 1970’s changed from reporting, implementing, and planning to planning, implementing, and reporting. This reflects that the primary activity of the accounting system in 1950 was reporting costs for the financial statements, while in the 70’s an enhanced role of planning and decision making was fostered. Some comparisons are provided in the Table 1 below.

Table 1: Strands of Managerial Accounting Thought

Table 2: Relationship between Managerial Accounting and the three Strands

Why was there a gap in innovations within the Management strand during the 1930’s through 1990? Because the Management strand is rooted in practice (not research) and any changes would need to be preceded by major problems creating a need for change. MBA training and tools appeared to work only because long-run problems went unnoticed due to prosperous times. There was no perceived need to change.

The focus of the Economic strand stems from deductive analysis leading to decision models for managerial problems. The roots of the Economic strand in managerial (as well as financial) accounting is quite possibly due to the greater availability of doctoral programs of study in economics versus business. This resulted in many influential writings addressing accounting problems, being written from an economics standpoint.

As Horngren notes, decision-making issues (influenced by economics) have been the main emphasis in managerial accounting over the past four decades. Any investment made by a firm (including accounting itself) must meet a cost-benefit test. The role of formal models to solve problems are stressed. A major criticism based on this aspect of the economics strand is that managerial accounting is reduced to a set of decision models. However, more recently there has been a shift from isolated decision models to a systems design approach. This shift has moved the Economic strand closer to the Management and Behavioral strands.

The newest strand is the Behavioral strand and it is concerned with how people respond to managerial accounting techniques. This strand can be easily confused with the Management strand. The Behavioral strand focuses on how well (or bad) the management accounting system works. It does not offer prescriptions for success. The work of Argyris (1952) pointed out that the management and behavioral strands have related non-accounting cores. The Behavioral strand has been strongly influenced by the economics strand by altering key economic assumptions to produce Behavioral issues related to problems of measuring performance, non-monetary incentives, and company politics. The Behavioral strand's main contribution to managerial accounting is its focus with problems of poor system design that lead to inappropriate employee behavior. It helps point to whether the system, or the employees, is (are) dysfunctional. The Behavioral strand helps management understand people which is important since managers have to deal with the day-to-day problems of motivating and directing people.

As pointed out by Shillinglaw and Horngren managerial accounting’s main future concern will be with decision model and system design issues. Also the type of data managers need has changed, activity-based cost systems will need to be continually monitored for relevance. Better performance measurement and incentive rewards will need to be integrated within the accounting system.