Accounting Changes.

After the World War II, business gradually marked the genesis to the era of globalization because of the strong business environment formulated under the helm of stable governments. After the war the prominent powers such as the British acquired massive control over the business world. Britain recorded the highest degree of success of success because as a nation had the best infrastructure. Her economy already had become industrialized and hence the emergence of accounting profession in the quest to maximize the profits Institute of Management Accountants. (1989). by the end of the war many business were establishing their premises across different location in the globe.

The cost of operation at this point in time was grossly inflated and only few firm could meet the charges f professional accounting services.  On the other hand these firms could not support the high operation costs and the voluminous employee populace. The governments of the day also required to earn revenue and hence introduced excess taxes and cost determination taxes. Institute of Management Accountants. (1989).As the profession kept on growing, new bidding regulations, procurement procedures among other basic accounting principles were set.  Businesses operating on the new economic dawn had to change their way of financial management such that every firm operating at this time had to operate precise and existing financial chronicles. At this early point, the accounting profession was at its tender age and hence the basic accounting knowledge formed the basis to daily management of the financial resources owned by an organization.

Accounting entities comprehensively took over the daily control of the finances across the corporate world replacing the audit firms who has been the predecessors of financial management prior to the accounting profession. Auditors never run the daily financial management duties.  Since they were seasonal managers, firms could never ascertain the real time loopholes within the management systems.  The need to maintaining a proactive way of management hence   dawned its chance.  Globalization hit the growth trend by late 1956.

 

Firms realized positive changes upon introduction of the accounting profession. Accountability, honesty, integrity and relevance became fundamental requirement of management and general operating in closely all entities. The performance was however hit by the immediate problem of government policy. The profits and positive organization development introduced in the era of accounting was certainly hit by the challenge of taxes set by different administrations. Firms had to realign their organizational policies to create room to the new costs in the form of taxes.

Probably the most significant change and development in the accounting professional over this period was the introduction of mathematic and systemic approaches that could employ new technology to monitor the financials of the enterprises. The mathematical and systemic approaches gave birth to the scientific management and operations research practice in accounting.  This has to be greatest milestone of this era. It an invention that led to the famous Big Eight adopted these new ways of accounting. Operations research and scientific management increased the performance of these firms since the operations had even a more precise and automated accounting structure. By 1970 approximately 92% of all firms across the globe had embraced either scientific management accounting culture or adopted the operations research accounting culture.  Accounting has been a progressive journey solely motivated by entrepreneurs need to maximize their profits.

Just like any other invention, accounting has had its dire uncertainties that for long have undermined the performance of different entities. The following causes led to changes in the accounting profession.

  • The increased number of inventory because of the business boom after the war.
  • The economic peace and tranquility instigated a sense of harmony and self-belief among the business class and hence creating the competitive business environment.
  • The willingness by the economists’ society to turn from propaganda based economies to adopt development oriented economics.
  • Increasing number of potential clientele populace and hence increasing opportunities.
  • The demand for prudent financial management services led to the emergence of robust accounting services.
  • With the positive trend of technological and infrastructural developments the field of accounting had to upgrade in order to house the enormous cash flow generated in the wake of new business opportunities.

The following error were however common during this period.

  • Errors of omission primarily as a result of poor accounting understanding.
  • Stagflation was another major problem in this particular period hence slowing economic growth and development process and n return resulting to high rates of unemployment.
  • Incompetent economic policies left majority of firms in conflict with the regulatory authorities/.

The Balance sheet below highlights one of the common balance sheet errors of the post-world war II accounting.

Micchigan Limited.

Balance Sheet.

December 31, 1970.

Assets                                                              Liabilities

Cash                    25,000                               Accounts payable     50,000

Land                   150,000                             Loans payable           145,000

Capital stock      120,000

295,000                                                            195,000

 

NOTE:

Capital stock is not an asset but rather a liability.

Crucial assets and liabilities have been omitted in this balance sheet hence it is not comprehensive.

 

References

Institute of Management Accountants. (1989). Management Accounting, Volume 70, issues 7-12.

 

 

 

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