The Known Systematic And Scientific Accounting

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The known systematic and scientific accounting was first introduced by Luca Pacioli a.k.a “Father of Accounting” in 1494 where he recorded transactions in double entry accounting system. After the industrial revolutions in 18th Century, hundreds of manufacturing industries were established which led to numerous and complex transactions, thus recording and interpreting this data proved essential to be efficient and effective in drawing decisions. The traceable cost accounting implemented in practice was by textile mills, railroads and steel manufacturing industries as they handled large volume of transactions and planning was a key for success and estimating profitability. To this point, businesses only focused on the (direct) cost side of …show more content…

J. Maurice Clark (1923) outlined different types of overhead costs such as avoidable, sunk, incremental and relevant costs with which we are still familiar today. Clark illustrated “different costs for different purposes” and by using statistical data to estimate cost, it is more objective than that of judgemental arbitrary basis. However, he feared confounding factors that altered statistical relationship between cost and output but in present day we use multiple regressions to account for these factors. Clark separated cost accounting information from financial accounting for analysis on pricing strategy and operational efficiency. (Kaplan 1983)
Decentralised operations and vertical integration at DuPont Corporation and General Motors provided more effective and efficient planning, coordination and control essential for the sustainability of the business at the time period. It also allowed an opportunity for development and innovation to the modern day cost accounting practice. The corporation prioritise on increasing ROI rather than its earnings as a means of true profitability test. The importance of investment centre concept was realised and long term responsibility accounting was somewhat accounted for as traditionally emphasis was only on internal level only. ROI also promoted to draw budgets and variances thus after acquiring GM by DuPont, pricing was through budgets and various amendments were made to reach

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