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 The Development of Cost and Management Accounting:
A Historical Perspective

Adum Smith Ovunda*

*
[Rivers State University of Science and Technology, P.M.B. 5080 Nkpolu Oroworukwo, Port Harcourt, Rivers State, Nigeria ],
[ovusmith@yahoo.com]

© 2015. Adum Smith Ovunda. This is a research/review paper, distributed under the terms of the Creative Commons
Attribution-Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/, permitting all non-
commercial use, distribution, and reproduction in any medium, provided the original work is properly
© JournalsBank.com (2015) ISSN 2220-9425
 European Journal of Humanities and Social Sciences Vol. 34, No.1, 2015

The Development of Cost and Management Accounting:

A Historical Perspective

Adum Smith Ovunda

Abstract
The aim of this paper is to describe the historical origin and development of cost and management
accounting. This study has successfully linked the modern management accounting systems to the past to
ensure a better understanding. It was gathered that the existence of cost accounting as one of the oldest
managerial tools dates back to the ancient times. The formal beginning of cost and management
accounting is ascribed to the industrial revolution of the nineteenth century which was characterized by
the emergence of large business enterprises. The nineteenth century, according to Parker (1969) is
regarded by accounting historians as the “costing renaissance” during which important developments in
cost and management accounting took place and most of the methods that are in use today appeared in
manufacturing companies.

Keywords: Cost Accounting, Management Accounting, Management Accounting System.

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I. Introduction Cost accounting, dated back to the ancient times, is

one of the oldest managerial tools used to determine
Over the years, Cost accounting techniques have
the amount of taxes that were taken by kings or used
been employed in the determination of the prices of
to determine the prices of the products that trading
products as well as in assisting and facilitating the
people of antiquity were selling. The trading people
process of decision making. Although cost
of ancient times such as the Chinese, Egyptians and
accounting has evolved as a result of advancements
Arabs had accountants in the service of the royal
in production technology, some of its early practices
courts, some of whom were experts in the
may be stated to be somewhat similar to those that
determination of costs (Perren, 1944). According to
are being used today.
Perren (1944),
The main objective of this study is to examine the
In Egypt, 3,000 years before Christ,
historical development of cost and management
accountants had to present to the Pharaohs
accounting and the reasons that support this
each year a detailed report on the net cost of
development in the academic literature. A better
harvest, so that just taxes on wheat could be
understanding of the modern cost and management
levied. The ancient Code of Manu made
accounting systems which are otherwise referred to
obligatory the periodical auditing of trading
as the „traditional‟ systems can be achieved if they
profits by court auditors. ...... In Books VII
are properly linked to the past. This is to say that it
and VIII of these sacred Laws we find the
would be better appreciated if the historical
following two passages: `Merchandising
perspective is brought to lime light. However, this
experts will establish the sales price of
study would examine the evolution of the traditional
goods, so that the king may levy 1/20 of the
systems by way of describing the various methods
profit thereon' ...`the sales price of
of cost allocation, cost drivers as well as their
merchandise shall be evaluated according to
usefulness in the decision making process. This
the distance it has travelled, the time it is
study would also create a link between the old and
kept in storage, the expenses connected
modern practices in cost and management
with it, the time it has to travel to reach its
accounting thus, providing a guide for researchers
final destination, and the profit that can be
and advanced business students in the event of
anticipated.
future researches.

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 European Journal of Humanities and Social Sciences Vol. 34, No.1, 2015
The duty of calculating the costs of products in
ancient times was performed by court officials and
the whole essence was to be able to determine the
value of taxes. At about 1100 BC in ancient China,
there existed some form of government auditing,
budgetary accounts, expenditure control, and
periodic reporting. These were some of the costing
techniques used by governments in ancient
civilizations.
The nineteenth century saw the emergence of large
business enterprises like the textile mills, iron and
still works, which made extensive use of machinery
in industrial production, hence the general belief
that cost accounting is a product of the nineteenth
century. For the systematic recording technique of
cost accounting which was developed in the
nineteenth century and extended later on, this belief
holds sway. But there existed much older elements
of costing in the form of industrial bookkeeping
practices and techniques. As early as the beginning
of the fourteenth century, some industrial accounts,
early and simple forms of cost accounting were in
use, as shown by some medieval business records
that exist in the twentieth century (DeRoover, 1968).
To support this argument, Edwards and Newell
(1990:41) state that the use of product costing is not
a product of the nineteenth century.
The costing techniques that were practised earlier on
in the medieval era, apart from their simple
© JournalsBank.com (2015).
structures, were very similar to many of the
techniques employed in cost accounting in the
twentieth century. Take the evaluation of byproducts
as an example. This paper is aimed at presenting a
historical perspective of the development of cost and
management accounting. Secondary data sources are
employed in the literature review section of the
study in which textbooks, journals, papers, and other
scholarly presentations were used to do justice to the
study.
2. The Origin of Cost Accounting
Generally, in the accounting history, it is believed
that the double entry system of accounting formally
started with Luca Pacioli‟s Summa which was
published in 1494. But facts in the accounting
literature show that double entry bookkeeping was
already in practice by the Venetian merchants and
several others in Northern Italy long before Pacioli‟s
treatise which only described the system. Though he
never laid claim to the invention of the all-
embracing double entry system of accounting,
researches have shown that he laid the stepping
stone hence, his recognition as the father of modern
bookkeeping (Adum, 2015b).
Arabic numerals were introduced around the early
thirteenth century as a result of the extensive trading
arrangement which the Italian merchants were
engaged in with Arabs living in the Middle East,
North Africa and Spain (DeRoover, 1956). As
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businesses grew, accounts were used, though in a
very simple way, to cost products. In the accounts of
Garner (1988), a firm known as Del Bene was
established to in Florence, Italy to convert raw wool
into products.
The system of accounting records adopted by this
firm, though very crude when compared with later
developments, represented some of the earliest
examples of cost accounting. At about 1350, the
firm was able to derive prime costs and operated
accounting books for “the results of trading or
mercantile activity” and “the central workshop
data”. Later on such other books as “the book of raw
wool purchased”, “the laborers wage book” and “the
dyers wage book” were established and used. Those
books were used to record every transaction relating
to the purchase of wool, the labor expenses for
manufacture of certain quality and quantity of
woolen cloths, and of course, the cost of dyers.
However, these books were periodically
summarized and the balances in them transferred to
a ledger book which shared a lot of similarities with
the modern ledger. A profit or loss is ascertained at
the end of the period by subtracting liabilities,
capital and deferred sales from the total assets.
Similarly, the first workshop that produced cloths
according to Garner (1988) was established by
Francesco di Marco in Prato, Italy in 1382. One of
the books used by the workshop at about 1395 had a
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resume of costs incurred in producing two pieces of
cloths which measured 32.6 meters long and
8.1meters wide. The byproducts of the production
were deducted from the total to arrive at the net cost
of the two pieces of cloths. This scenario goes on to
suggest that the cost of production in modern cost
accounting had been known by accountants about
one hundred years before Paciolo wrote his famous
book. Therefore, as early as the fourteenth century,
applications of some costing techniques and even
single entry recording technique were well ahead of
the theory, which appeared in the late fifteenth
century (Haydn, 1985; Garner, 1988).
3.1 Cost Accounting in the Seventeenth and
Eighteenth Centuries
The most interesting examples of seventeenth
century cost calculations belong to the members of
the Worshipful Company of Bakers in 1620. This
company prepared a cost statement to show that the
selling price of baked bread in 1620 was not
adequate to cover the cost of baking (Garner, 1988).
According to Edwards and Newell (1990) about a
copper production mine that was located near
Keswick in 1615,
Hechstetter, owner of the copper mine,
evaluated the relative cost of producing
rough copper in detail. This indicates that
comprehensive accounts of all aspects of
production were kept. Weekly cost of labor,
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various materials, carriage, horses, etc. are
listed and multiplied by 52 (i.e., the number
of weeks in a year). The cost of copper ore,
charcoal and other smelting materials, as
well as miscellaneous items such as rent
and interest are added to this amount which
gives an annual total cost of production.
Hechstetter was using these calculations for
cost related decision making, from the late
16th century. For example, he calculated
the effect on profit of selling copper in a
different geographical area; and also the
effects on cost of changing the level of
production.
To show that what is known as process costing also
existed in the eighteenth century, Edwards (1937)
gave a detailed example of the eighteenth century
accounts for “thread hosiery production” set out by
Wardhaugh Thompson, in his book titled “The
Accountants' Oracle” published in 1777. He said,
“the accounts are worthy of note because they show
the materials moving process to process [and]
acquiring costs as they move”. Another example of
the existence of cost accounting in the eighteenth
century is evident in the account of Fleischman and
Parker (1990). They explained the accounting
system of the Carron Company, which began
operations as a pioneer iron foundry in Scotland in
1759. During the industrial revolution, the company
adopted a superior cost management system and its
© JournalsBank.com (2015).
system showed several cost management principles
particularly between 1759 and 1786. It was the
policy of the company to charge individual
managers and departmental head with the
responsibility of cost management as early as the
1760s. The company produced two products-
anchors and anvils. And in a bid to accurately
determine production costs, separate accounts were
established. In 1763, the company, using
predetermined proportions, allocated overhead costs
to departments.
3.2 Cost Accounting in the Nineteenth Century
Most accounting professionals, researchers, authors,
and scholars see the nineteenth century as the formal
beginning of cost and management accounting
because this century was characterized by the
emergence of large business enterprises. According
to Johnson (1981), this was the period of the
industrial revolution, during which England and the
US witnessed the upshot of large cotton textile
factories that used cost accounts to ascertain the
direct labor and overhead costs of converting raw
materials into finished yarn and fabric.
Also contributed to the advancement of cost and
management accounting were iron and steel works,
and the construction of railroads particularly in the
US (Johnson and Kaplan, 1987). Charlton Mills of
Manchester according to Stone (1973) had a
complete cost accounting system that was first used
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as early as 1810 and it was integrated with a double
entry system which produced a trial balance on s bi-
monthly basis. The system had fourteen cost centers
in which prime costs for labor and materials were
collected and general expenses were allocated to
them using some predetermined rates. In the
Charlton mill, cost accounts were designed to reflect
the cost flow of the manufacturing process. The
system charges the costs of raw cotton to the
warehouse trading account at purchase price plus
freight-in.
Wages for cleaning process were also charged to the
warehouse account. After reflecting those charges in
the warehouse account, the cotton would then be
transferred to the five carding rooms at prime cost.
Every output of the carding room was transferred to
eight spinning rooms while the waste was
transferred to the warehouse. Note that five carding
rooms and the eight spinning rooms were each
treated as a cost centre. Every direct labor expense
incurred in favor of any carding room was charged
separately while general expenses were allocated to
each of them.
However, direct labor cost and general expenses
were charged to each spinning room and the
finished products were transferred back to the
warehouse at an extra company price. Now what
happened each time products were sold? The
warehouse trading account was usually credited at
© JournalsBank.com (2015).
sales price. The Charlton mill cost accounting
system also recognized depreciation which it
charged twice a year at an annual rate of 5%.
Interestingly, Tyson (1992) pointed out that
depreciation as was widely understood in the British
textile industry in the 1830s. But it was yet to be
used by the US textile or cotton mills at that time.
Johnson and Kaplan (1991) contend that cost
accounts in which remarkably sophisticated cost
systems were used survived from integrated multi-
process cotton textile mills in the US about the first
half of the nineteenth century. The purpose of cost
accounting in those mills was to coordinate, control
and increase the efficiency of conversion process,
material and labor utilization.
Also, in the nineteenth century, the Iron and Steel
Industry was another large scale production
environments in which complex production
processes and reliable cost data were expected to
emanate. Between the 1820s and 1830s, British
mining and smelting industries were using some
elements of costs like material, labor and overhead
costs (Haydn, 1985:1067) which were similar to the
cost elements used at about the last decade of the
twentieth century.
The mining and smelting companies charged
overhead costs to departments and products using
prime costs in which overhead costs were allocated
to departments and products on the basis of a certain
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percentage of direct materials, direct expenses, and
direct labor. Overhead costs were also charged to
departments and products using direct labor hour
methods in which overheads are allocated on the
basis of a percentage of the labor costs that could be
clearly identified with a specific department or
product (Edwards & Newell, 1990). At about the
last quarter of the nineteenth century, one iron and
steel company which was managed by Andrew
Carneige was by virtue of his managing strategy,
regarded by some authors as being one of the
earliest utilization of cost information for
management needs in the US.
According to (Johnson & Kaplan, 1987), this giant
steel manufacturing company which was managed
by Carneige for about 30 years adopted a cost
accounting system that was primarily concerned
with continuous gathering of data on all direct costs
relating to every process of the manufacturing
activity from the blast furnace to the rolling mill. In
the same vein, just like the manufacturers, the
railroads devised cost accounting systems to
evaluate and control their internal processes of
providing transportation services. Here, the ton-mile
was used as the basic unit of output, and complex
internal accounting procedures were created to
calculate the cost per ton-mile.
The nineteenth century, according to Parker (1969),
is regarded by accounting historians as the “costing
© JournalsBank.com (2015).
renaissance” during which important developments
in cost and management accounting took place and
most of the methods that are in use today appeared
in manufacturing companies. Furthermore, Johnson
and Kaplan (1991) contend that costing practices
such as standard costing, process costing, overhead
utilization as a cost element and its allocation to
products or departments using machine/labor hours
or prime cost methods, etc., were all used in the
industries discussed above. These techniques,
however, were greatly improved in the first quarter
of the twentieth century.
3.3 Cost Accounting in the Twentieth Century
In the late nineteenth century up till the early part of
the twentieth century, engineering managers such as
F. Taylor and Emerson devised new cost accounting
procedures primarily to assess and control financial
and physical efficiency of processes (Johnson &
Kaplan, 1991). Because of the financial and physical
efficiency mentioned, one may be tempted into
concluding that it was meant to evaluate the overall
profitability of the company. No. The whole idea
was aimed at assessing the efficiency of processes.
The cost systems which existed in 1910 provided
information that was relevant to a wide range of
decisions concerning efficiency and product
differentiation.
The systems were designed by engineers working in
factories to assign costs to products and product
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lines. After 1910, these practices faced out probably
because the collection of cost information was very
difficult and expensive for a widening range of
products thereby making it nearly impossible to
justify their benefits (Kaplan & Atkinson 1989). In
their place, several other costing procedures came
up and the twentieth century accountants adopted
them to evaluate the cost of inventories for financial
reports.
However, while this kind of cost information was
reliable for evaluating cost of inventories and
financial reporting, it was irrelevant and even
misleading for decision making needs, particularly
for strategic product decisions. An economist,
Maurice Clark, in his book “Studies in the
Economics of Overhead Costs”, which he published
in 1923, discussed fixed and variable costs; joint,
sunk, differential and residual costs; short and long
run fluctuations; and a number of other issues from
the economist‟s point of view. This book which
most researchers and historians consider as a major
contribution to cost accounting literature in the
1920s also advocated that different costs should be
used for different purposes.
4. The Emergence of Management Accounting
Cost accounting and management accounting were
in most cases used interchangeably in the 1940s‟
business curriculum. However, some textbooks
which had almost the same terminologies as are
© JournalsBank.com (2015).
used today, emphasized on such mechanics of cost
accounting as journals and journal entries,
requisitions, time cards, vouchers, purchase orders,
etc (Anthony, 1989). As a matter of fact, in the
1930s and 1940s, there were no textbooks
emphatically devoted to management accounting.
In other words, the books which existed during
those periods dealt with numbers and the aim was to
determine the true cost of manufacturing. This
suggests that management accounting should deal
with making decisions as well as the behavioral
factors that affect managers who use those numbers
and not just the numbers. “Cost accounting is
concerned with cost accumulation for inventory
valuation … whereas management accounting
relates to the provision of appropriate information
for decision making, planning, control and
performance evaluation (Drury, 2004)”.
In management accounting, different costs are
employed for different purposes while cost
accounting focuses on the measurement of full
costs. With this distinction between cost accounting
and management accounting coupled with Maurice
Clark‟s contention that different costs be used for
different purposes, Bill Vatter came up with the first
textbook on management accounting which was
published in 1950 (Johnson and Kaplan, 1991).
According to Anthony (1989), Shillinglaw and
Horngreen in 1961 and 1962 respectively, published
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the first cost accounting textbooks with managerial
emphasis. Horngreen (1989) states that among cost
accounting textbooks, the emphasis on cost control
and management decision making shifted from 27%
of the total chapters in 1945-50 to 54% in 1961-70.
During the same periods, however, inventory
valuation that comprised 73% of the textbook
chapters in 1945-50 declined to 46%. This shows a
growing interest of using cost accounting
information in decision making, rather than simply
for inventory valuation and financial reporting.
During the 1950s and 1960s, researches were
carried out by scholars the focus of which was on
relevant costs for decision making. This period saw
the analysis of the cost concepts that relate to capital
budgeting, inventory, and cost-volume-profit
decision models which of course, were relevant to
decisions made by an individual manager.
Thereafter, the single-manager information
economics approach was replaced by agency theory
research which viewed accounting information as
the basis of contracting between economic agents
that have different ownership rights, different
information, and different prior beliefs (Kaplan,
1984). Some researchers in the 1980s began to
express their discomfort over the state of cost and
management accounting.
The traditional cost accounting systems were
strongly criticized on the grounds that they distorted
© JournalsBank.com (2015).
cost information due to the fact that they were
simply obsolete and could not capture the
requirements of the new production environments.
In the same vein, Johnson and Kaplan (1987) aired
their views on the obsolescence of the existing cost
and management accounting systems in their book,
Relevance Lost: The Rise and Fall of Management
Accounting which was published in the mid-1980s.
However, the article “Hidden Factory”, published
by Miller and Vollman (1985) which introduced
“transaction based costing” and a couple of case
studies performed in real manufacturing
environments, resulted in the introduce a new
product costing system called “Activity Based
Costing” by Robin Cooper and R. S. Kaplan. They
explained the system in their article titled “Measure
Costs Right: Make the Right Decisions”. But
Cooper (1990) later refined and organized the
system by adding such new concepts as hierarchy of
activities. It is these developments and other new
challenges faced by the traditional cost accounting
systems that pushed managerial accounting to such a
critical stage that its development and some of its
conceptual foundations are being so scrutinized than
has ever been done (Shillinglaw, 1989). The good
news about these latest developments is that it has
made the researchers to be so optimistic about the
future of modern cost and management accounting.
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4.1 Development of Management Accounting
There is no universally accepted view in respect of
the origin and development of Management
Accounting. As a matter of fact, the issue of when
management accounting originated and the reason
behind the development is still in contention. Some
associate the beginning of management accounting
to the requirement for information to optimize
economic resources during the Industrial Revolution
in the United Kingdom (Edwards, Boyns &
Anderson 1995). Others such as Chandler (1977)
and Johnson & Kaplan (1987) suggested that the
reason the development of management accounting
was attributable to the creation of large corporations
that internalized transactions, which were previously
priced by the market.
In their opinion, this occurred shortly after the
coming of the railways and the telegraph in the
United States of America. Another school of
thought saw the origin of management accounting
but as a means of exploiting the society and as such,
justifies and mystifies the existence of structural
inequality in the society (Neimark &Tinker, 1986).
Yet another school of thought according to Hoskin
& Macve (1988) saw management accounting to
have originated when it was used for the purpose of
cost control specifically when accounting
information was used to exert human accountability.
But Armstrong (1985) had a different view. He sees
© JournalsBank.com (2015).
management accounting to have originated as a
result of efforts by the accountancy profession to
develop her knowledge and techniques into systems
of managerial control in order to achieve managerial
ascendancy. However, in view of Maher (2000),
“while management accounting concepts can be
traced back at least to the beginning of the Industrial
Revolution, management accounting as a teaching
discipline appears to have got off the ground in the
late 1940s.”
4.2 Development of Management Accounting
From 1700 – 1950s
According to the International Federation of
Accountants (IFAC) (2002), the period before the
First Management Accounting Revolution (that is
the period from 1700 – 1950s) is known as the
“classical period” which ended in the late 1950s.
Within this period especially from 1820-1885, there
was little or no contribution to cost accounting
(Robles and Robles, 2000). In other words, this
period was merely characterized by the recording
financial information. Thereafter, according to
Johnson & Kaplan (1987), hierarchical
organizations began to emerge-the textile mills in
the first half of the nineteenth century, the railroads
in the middle of the nineteenth century, as well as
the steel companies of about the second half of the
nineteenth century.
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The Industrial Revolution of the eighteenth and
nineteenth centuries created a very high need for
accounting information to be able to cope with the
business operations of the time which had become
more complex thereby posing enormous challenges
to accountants to provide the much needed
information. Accountants were expected to provide
the relevant information necessary to control
expenditure and fix prices for manufactured
products because manufacturing activities were very
much on the increase (Wyatt, 2002).
Management accounting may be viewed to have
started between 1880 and 1889 as Robles & Robles
(2000) have it that “By that time there was
remarkable progress in Management Accounting,
mainly related to burden/overhead concepts,
emphasizing the need of accounting by functions.”
The pioneering works of Du Pont (1903) and
General Motors (1920) led to the development of
several management accounting practices. By this
time, cost accounts for labor, material and overheads
as well as budgets for cash and income, flexible
budgeting, standard costs, variance analysis, transfer
prices and divisional performance measures had
appeared (Jones 1995:139).
Management accounting procedures began
develop as managers constantly sought information
to improve efficiency and profitability. Between
1885 and 1920 cost accounting evolved from a level
© JournalsBank.com (2015).
where the methods resembled medieval
bookkeeping to a point where the best practices
approximated the descriptions in modem textbooks
(Chatfield, 1977). Such disciplines as economic and
engineering contributed immensely to the
development of management accounting. One of
such contributions according to (Parker 1969) was
that of Henry Hess, a mechanical engineer who
developed the first breakeven chart. The
contribution of Hess was affirmed to be the last in
mean time owing to the fact that cost accounting
after 1920 became increasingly dominated by the
financial accounting mentality and organizations
were increasingly run by “numbers” (Johnson &
Kaplan, 1987). (Johnson & Kaplan, 1987) further
emphasized that nearly all management accounting
practices that are still in use had been developed by
1925.
4.3 Development of Management Accounting
from Late 1950s – 1980
The very first Management Accounting Revolution
otherwise referred to as the “modern management
accounting period”, started in the late 1950s and
ended in the early 1980s (Epstein & Lee, 1999).
During this period a lot of new researches were
to carried out and new decision-making tools for
managers were also provided. The researches during
this period mainly focused on profit maximizing
models like linear programming, cost variance
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investigation models, transfer pricing, performance In 1956 Robert Anthony wrote a textbook which
evaluation and opportunity cost models. All these focused on
models were based on neo-classical economic
 How to formulate or analyze new problems
theory (Ashton et al. 1991; Scapens, 1991).The
 Appropriate measures of cost.
management accounting tools that were developed
during this period according to Epstein and Lee This book paid more attention to the decision-
(1999) reflected economic theory and were based on making role of cost management than on the
the following assumptions: techniques of cost determination. But two issues
came up: “the direct costing controversy in the
 Tasks are reutilized at the managerial and
1950s” and “the mathematics of management
operational levels.
accounting in the 1960s” as a result of the new
 The external environment (in which the
approach to management accounting information for
company operates) is stable with few price or
decision making. The issue of direct costing
demand fluctuations.
controversy borders on the difference between direct
 The sole purpose of management accounting is
and absorption costing which of course lies in the
to aid decision making.
recovery of fixed costs. For absorption costing,
Out of the need for decision-making tools to solve fixed overheads are allocated to all the units
the traditional problems of improved profit and manufactured. But in the case of direct costing,
efficiency, new techniques evolved just after the fixed costs are allocated to the actual units sold.
Second World War. These techniques were based on Parker (1969) came up with an idea which
developments in economics and decision theory. emphasized the importance of decision making and
However, the new decision-making tools did not using different costs for different purposes.
take into account, such external forces as
However, Maher (2000) suggested a three-way
technological change, changes in product demand,
classification of costs which still forms the
or initiatives by competitors (Epstein & Lee, 1999).
cornerstone of management accounting courses.
Epstein & Lee (1999) therefore concluded that the
They are: differential costs, full costs, and
new decision-making tools in management
responsibility costs. The mathematics of
accounting assumed unbounded rationality,
management accounting on the other hand
unlimited data and that the costs of these analyses
emphasized on mathematics as the language of
generally were less than the benefits.
science and according to Boer (2000), if the

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education provided by business schools were to be
scientific, then management accountants should
increase their knowledge of mathematics. So such
concepts as marginal costing, discounted cash flows,
and statistical cost estimation techniques
subsequently formed an integral part of management
accounting training.
4.4 Development of Management Accounting
From 1980 – Date
As the world tends to a global village, the world
economy also changed profoundly. Consequently,
organizations have to face dramatic changes in both
business and competitive environments. For so
many reasons such as the deregulation of markets,
improved international transportation systems,
improved communication systems, international
competition became more pronounced during this
period (Drury, 1996). Thus there was increased
pressure on organizations to improve the quality and
efficiency of their operations and as such, focus on
customer satisfaction.
In a bid to meet these demands, organizations
resorted to the use of advanced manufacturing
technologies robotics, computer aided design, and
flexible manufacturing systems. However, these
changes repositioned manufacturing activities and
by extension, changed the behavior patterns of
manufacturing costs. Researches in the field of
management accounting began to the fact that
© JournalsBank.com (2015).
production function had undergone some changes
even though management accounting could not
address such changes. According to Epstein & Lee
(1999), the changes in production technology
required
 new costing models to describe the production
processes
 the recognition that investment in new
accounting systems should be cost effective.
Note however, here that changes in business will not
seize to shape the nature of management accounting.
Therefore, management accountants are strongly
advised to adapt themselves and their practices to
supply appropriate information for decision making
purposes.
5. Summary and Conclusion
This paper has dealt with the historical origin of cost
accounting and traced its development from the very
beginning down to the twentieth century. The study
has also examined the emergence of management
accounting as well as its development starting from
1700 to this present date. Towards the first half of
the twentieth century, there was great improvement
on the costing accounting tools used by the early
industries of the nineteenth century. During this
period the development of cost and management
accounting was not very fast. In other words, it was
somewhat slow irrespective of the fact that the
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manufacturing environment experienced some
drastic changes beginning from the nineteenth
century. The period was characterized by the use of
cost information for inventory valuation and
financial reporting with little or no emphasis on
decision making.
However, the situation improved drastically in the
1950s as there were publications of books that
focused on the decision making role of cost
© JournalsBank.com (2015).
information. The period of the 1950s and beyond
witnessed new researches aimed at providing new
decision-making tools for managers. The researches
during this period mainly focused on profit
maximizing models like linear programming, cost
variance investigation models, transfer pricing,
performance evaluation and opportunity cost
models. All these models were based on neo-
classical economic theory (Ashton et al. 1991;
Scapens, 1991).
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