“Corporate management accounting systems are inadequate for today’s environment”[1].

In essence, this is the question for all accountants articulated by Johnson and Kaplan in their groundbreaking book “Relevance Lost”.  Providing essential data for management decisions is the key task for any accountant in any era.  Direct cost for any element is easy to obtain.  Applying the indirect cost to a product of service is the longstanding issue.  Since the beginning of accounting, there have been many practices and advanced technology that were acceptable during its time as the best tool to apply indirect costs ranging from direct labor allocation to activity base costing to cell manufacturing (machine time).  Each have their good and bad aspects, but as Johnson and Kaplan discussed in the above quote, have we improved?

Lean accounting tries to eliminate the issue of applying indirect cost and allow management to make better business decisions.  The article will start with the definition of lean.  The article will then focus on defining lean accounting, describe the benefits of lean accounting, and how to implement lean accounting.

[1] Relevance Lost, Thomas Johnson and Robert Kaplan (1987)

 

Published:  Journal of Cost Management.  Jan / Feb 2017 Issue.

Gary Kapanowski – Lean Six Sigma Master Black Belt – Excelsior

 

Download article from the Journal of Cost Management here:

Kapanowski final LEAN ACCOUNTING