Question

Describe the contingency theory of management accounting and discuss the relationship between various contingent factors and features of the management accounting system.

Answer 1

DETE samt from the man Account o preparate Contingency theory of Management Accounting A contingmoy approach to management is based on the theory that management effectiveness is contingent, on dependent upon the interplay between the application of management behavious and Specific situations. It claims that there is no best way to organize a Corporation, to lend a company, or to make decision. 13.4 Contingency theory in management accounting describes the situation al factors and portrays that management accounting system is contingent upon such factor is reality and contingent factors vary organization to organization and it is impossible to describe and spell out the charaches of management accounting in the prevalence of each such factor. The circumstance in which the organization move are distinct in nature and largely étteet the adoption, mechanism and sophistication of management accounting system. d! Pro loss Clause 17 or a con uthority y be necessar Detalls o has the is used is dit checklis 88 Relationship between various contingent factors and features of the management accounting system & ne raudte py of the site not free from Dictiona ration of the the front to se 18: Par ect of each Descriptio Rate of de Actual cos Additions sset, date Centra- hour The contingent factors ara mayor contributors to wasds. non-formation of universally acceptable effective management accounting system. As, contingent factors are unique in nature and are unfeasibile in reckoning and elucidation in isolation, hence they can broadly be categorized in Sin fore most areas according to the dominant characteristics of such ciruumstances. 1 The external environment. 2. Strategies and mission 3, Technology 4, Firm Intes denpenclence 5, Business unit firm and industry variables. 6 Kmowledge and observable factors.

July Contingency theony has been identified as an important area of reseasche in management accounting. The theory has also been applied to the sub unit level of organizational behavious. The appropriateness of management accounting in ondes to measure the effectiveness of different departments in large organization and toount found that contingeney factors were the major predictors of ette entent of effectivnes ton production depas ments. JE