Yudu - May 2015

unwanted products that may not sell in the future, thus reducing risk (Maskell, Baggaley, and Grasso, 2012). Tere is a distinction between cost accounting and cost management. Cost management improves profitability whereas cost accounting may create additional costs. For accountants, lean accounting eliminates the time consuming standard costing, budgeting minutia and overhead allocations, which may or may not be accurate. Accountants can easily measure the costs of processing for materials, labor and machine time in a lean environment. For lean accounting to be successful, cost accountants must understand how to implement it. Ideally, undergraduate accounting students should be introduced to the topic during an undergraduate cost accounting course. Lean accounting, however, is given minimal or no coverage in undergraduate courses or textbooks. Tree of the most widely used cost accounting textbooks cover the topic in a maximum of seven pages. Text coverage focuses on the development of value streams and the computation of operating income from these value streams (Horngren, Datar & Rajan, 2015). Undoubtedly, accounting and reporting

for standard production costs and variances is more complex than lean accounting, but may not provide information valuable to the firm. Te processes leading to the development of value streams and box scorecards, however, are complicated and must be understood by accountants both for reporting purposes and internal control. While standard cost accounting is primarily quantitative in nature, there are numerous qualitative, non-financial factors that drive the measures used in lean accounting. Despite the fact that this method of accounting is not acceptable for external reporting under generally accepted accounting principles (GAAP), it does offer promise for streamlining a company’s operations and increasing profitability (Horngren, Datar & Rajan, 2015). Accounting for lean manufacturing

represents an increased emphasis on cost management along with the traditional cost measurement. Cost management involves all aspects of the manufacturing cycle. To provide adequate coverage, cost accounting

textbooks should provide increased emphasis on quantitative and qualitative production factors, while production operations management textbooks should address cost management issues to a greater extent. Such an interdisciplinary approach will enhance learning. Te increased coverage in textbooks could also be complemented with cases in which students are required to establish and/or analyze a lean accounting system.

Te success of the lean philosophy depends in large part on how strongly committed the organization’s management is to its success. Tis commitment will be influenced by the quality of the managerial reports delivered by accountants. Terefore, it is essential that prospective accountants receive an adequate foundation in the principles of lean accounting during their college careers in order to help them understand its application to an organization’s operations. Long-run success in one organization may lead to other organizations’ implementation.

References: Cunningham, J. & Flume, O. (2003). Real Numbers: Management Accounting in a Lean Organization. Durham: Managing Times Press.

Fullerton, R., Kennedy, F., & Widener, S. (2014). “Management Accounting and Control Practices in a Lean Manufacturing Environment.” Accounting, Organizations and Society, 38 (1), 50-71.

Horngren, C., Datar, S, & Rajan, M. (2015). Cost Accounting: A Managerial Emphasis, 15th Ed., New York: Pearson Education, Inc.

Kennedy, F. & Brewer, P. (2006). “Te Lean Enterprise and Traditional Accounting—Is the Honeymoon Over?” Te Journal of Corporate Accounting & Finance, 17 (6) 63-74.

Kennedy F. & Widener, S. (2008). “A Control Framework: Insights From Evidence on Lean Accounting.” Management Accounting Research, 19(4), 301-323.

Maskell, B., Baggerly, B., & Grasso, L. (2012). Practical Lean Accounting, 2nd ed. Boca Raton: CRC Press.

Maskell, B. & Kennedy, F. (2007). “Why Do We Need Lean Accounting and How Does it Work?” Te Journal of Corporate Accounting & Finance, 18 (March-April), 59-73.

SkyMark, “Dr. W. Edwards Deming.” http://www. skymark.com/resources/leaders/deming.asp, retrieved on March 19, 2015.

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