Management and Cost Accounting 11th Edition

Book Preface

Fundamentally, this new 11th edition updates and builds upon the foundation in Management and 0 years ago and commenced our research collaboration in 1990 with research into contemporary man-agement accounting practices. I enjoyed collaborating with Colin, producing A Survey of Management Accounting Practices in UK Manufacturing Companies (ACCA) and Cost System Design and Profitability Analysis in UK Companies (CIMA) in addition to various journal articles. Colin was a pleasure to work with, he had a clear passion for this work, but for someone so renowned in the academic accounting community he was very modest about his achievements. There was always a humility in the way he went about all of his academic endeavours. Although our careers ultimately followed different paths, we maintained contact and so I am privileged to make a small contribution to this highly successful text-book which for over three decades and ten editions, has been at the forefront of helping students learn the key concepts and processes in management and cost accounting.
The aim of the 11th edition of this book is to explain the principles involved in designing and evalu-ating management and cost accounting information systems. Management accounting systems accu-mulate, classify, summarize and report information that will assist employees within an organization in their decision-making, planning, control and performance measurement activities. A cost accounting system is concerned with accumulating costs for inventory valuation to meet external financial account-ing and internal monthly or quarterly profit measurement requirements. As the title suggests, this book is concerned with both management and cost accounting, but with emphasis placed on the former.
A large number of cost and management accounting textbooks have been published. Many of these books contain a detailed description of accounting techniques without any discussion of the principles involved in evaluating management and cost accounting systems. Such books often lack a conceptual framework and ignore the considerable amount of research conducted in management accounting in the past three decades. At the other extreme, some books focus entirely on a conceptual framework of management accounting with an emphasis on developing normative models of what ought to be. These books pay little attention to accounting techniques. The objective has been to produce a book that falls within these two extremes.
The target audience for this book is undergraduate students who are pursuing a one-year or two-year management accounting course, and students who are preparing for the management and cost account-ing examinations of professional accountancy bodies at an intermediate or advanced professional level. It will also be of use to postgraduate and higher national diploma students who are studying manage-ment and cost accounting for the first time. An introductory course in financial accounting is not a prerequisite, although many students will have undertaken such a course.

STRUCTURE AND PLAN OF THE BOOK
A major theme of this book continues to be different financial information for different management purposes and how to explain this to students. The framework used in this book highlights that there are three ways of constructing management accounting information:

1. The first is cost accounting with its emphasis on producing product (or service) costs for allo-cating costs between cost of goods sold and inventories to meet external and internal financial accounting inventory valuation and profit measurement requirements.
2. The second is the notion of decision-relevant costs with the emphasis on providing relevant information to help managers to make good decisions.
3. The third is responsibility accounting and performance measurement that focuses on both financial and non-financial information; in particular, the assignment of costs and revenues to responsibility centres.

These are captured in Figure 0.1 and throughout the book we remind the reader of this distinction and point out where different examples of management and cost accounting information are – or are not – suited to particular circumstances.

The book is divided into six parts. Part One consists of two chapters and provides an introduction to management and cost accounting, its terminology and a framework for studying the remaining chap-ters. The following three parts reflect the three different ways of constructing accounting information. Part Two comprises five chapters and is entitled ‘Cost accumulation for inventory valuation and profit measurement’. This part focuses on assigning costs to products, to separate the costs incurred during a period between costs of goods sold and the closing inventory valuation for internal and external profit measurement. The extent to which product costs accumulated for inventory valuation and profit mea-surement should be adjusted for meeting decision-making, cost control and performance measurement requirements is also briefly considered. Part Three consists of seven chapters and is entitled ‘Informa-tion for decision-making’. Here the focus is on measuring and identifying those costs that are relevant for different types of decision. The title of Part Four is ‘Information for planning, control and perfor-mance measurement’. It consists of six chapters and concentrates on the process of translating goals and objectives into specific activities and the resources that are required, via the short-term (budgeting) and long-term planning processes. In addition, the management control systems that organizations use are described and the role that management accounting control systems play within the overall control pro-cess is examined. The emphasis here is on the accounting process as a means of providing information to help managers control the activities for which they are responsible. Performance measurement and evaluation within different segments of the organization is also examined. Part Five consists of three chapters and is entitled ‘Strategic performance and cost management, value creation and challenges for the future’. The first chapter focuses on strategic performance management, the second on strategic cost management and value creation. The third chapter concentrates on the emerging issues that are likely to have an impact on management accounting and considers some potential future developments in man-agement accounting. Part Six consists of three chapters and is entitled ‘ADDENDUM: The application of quantitative methods to management accounting’. This part can be incorporated flexibly depending on the wishes of the instructor.
In devising a framework around the three methods of constructing financial information, there is a risk that the student will not appreciate that the three categories use many common elements, that they overlap (see Figure 0.1) and that they constitute a single overall management accounting system, rather than three independent systems. Steps have been taken to minimize this risk in each part by emphasizing why financial information for one purpose should or should not be adjusted for another purpose. In short, each part of the book is not presented in isolation and an integrative approach has been taken.
A frequent consideration in a book of this type is how much the application of quantitative tech-niques should be integrated with the appropriate topics or if it should be considered separately. Quan-titative techniques have been integrated whenever they are an essential part of a chapter, but otherwise they are presented separately in Part Six. This approach allows for maximum flexibility. Instructors wishing to integrate ‘quantitative techniques’ with particular earlier chapters may do so by assigning readings from Part Six, while those who wish to concentrate on more ‘discursive’ material will not be distracted by having to exclude the relevant quantitative portions of chapters.

CHANGES IN THE CONTENT OF THE 11TH EDITION
Feedback in relation to structure and content of the previous editions has been extremely favourable and therefore no major changes have been made to the structure. The major objective in preparing the 11th edition has been to continue to produce an accessible text and to incorporate appropriate recent developments in the management accounting literature. The content and expression was thoroughly reviewed as well as the opportunity to rewrite or improve the presentation and explanation of the mate-rial. Greater attention has been given to emerging issues such as environmental and sustainability issues, ethical considerations, the knowledge-based economy, IT and digitalization.
We have also included a new ‘employability skills’ section at the end of each chapter, given the increasing emphasis on teaching employability skills. Comprehensive solutions to all these questions can be downloaded from the companion website to this title.
In addition, substantial updates have been made to the end-of-chapter assessment material that con-tains the solutions in a separate section at the end of the book. Finally, most of the ‘Real World Views’ that provide examples of the practical application of management accounting have been updated or replaced by more recent examples that provide better illustrations of the practical applications. Sug-gested outline solutions to the answers to the questions accompanying the ‘Real World Views’ have been added to the Instructor’s Manual accompanying this book.

LEARNING NOTES
The scale and scope of management accounting is always expanding. It is inevitable that not all instructors will use all chapters of this book in their teaching programmes. In order to meet the differ-ent requirements of lecturers, different course curricula and to retain the book at a manageable size, various topics have been included as learning notes that can be accessed by students and lecturers in the digital support resources accompanying this book. The learning notes tend to include the more complex issues that often do not feature as part of the content of other management accounting text-books, but which, over the years, have remained topics of relevance and interest. All learning notes are appropriately referenced within the text. For example, at appropriate points within specific chapters the reader’s attention is drawn to the fact that, for a particular topic, more complex issues exist and that a discussion of these issues can be found by referring to a specific learning note in the digital resources accompanying this book.
CASE STUDIES
Over 30 case studies are available in the digital support resources for this book. Both lecturers and stu-dents can download these case studies from the book’s companion website. Teaching notes for the case studies are only available for instructors to download. The cases generally cover the content of several chapters and contain questions to which there is no ideal answer. They are intended to encourage inde-pendent thought and initiative and to apply the content of this book in particular contexts. Case studies are also intended to develop critical thinking and analytical skills.
HIGHLIGHTING OF ADVANCED READING SECTIONS
One of the major advantages of this book, highlighted in feedback, has been the comprehensive treat-ment of management accounting. Throughout the book there are sections that have been identified as advanced reading. Instructors and students can decide whether or not some of the more advanced material is essential for their course. These advanced reading sections have been highlighted using a vertical coloured line. They should be read in detail only when the remaining parts of the chapter have been fully understood.
INTERNATIONAL FOCUS
The book is an established text in many different countries throughout the world. As a result, a more international focus has been adopted. A major feature is the presentation of boxed exhibits of surveys and practical applications of management accounting in companies in many different countries, par-ticularly on the European mainland. Most of the assessment material includes questions set by the UK professional accountancy bodies. These questions are appropriate for worldwide use, and users who are not familiar with the requirements of the UK professional accountancy bodies should note that many of the advanced-level questions also contain the beneficial features described above for case study assignments.