Behavioral Assumptions of Management Accounting

The purpose of this paper is to discuss the differences between the underlying assumptions of traditional management accounting and modern (1966) organizational theory.

COMPARISON OF TRADITIONAL MANAGEMENT
ACCOUNTING AND MODERN ORGANIZATIONAL THEORIES

CONCEPT OR ASSUMPTION	TRADITIONAL MANAGEMENT ACCOUNTING THEORY	MODERN ORGANIZATIONAL THEORY
Objective of organization:	Maximize profit. Assumes that sub-goals are divisible and additive (responsibility accounting).	The dominant members have goals, the organization cannot. Survival of the dominant members is the main goal and satisficing is second. Sub-goals are not divisible and additive and may conflict.
Human behavior:	Lazy man theory X. Motivation is economic need. (See the McGregor summary).	Motivation factors include psychological, social and economic factors. Mixed theory X and Y.
Management behavior:	Must control employees with close supervision to maximize profits.	Make decisions to balance the contributions from participants with organizational inducements. Control through assigning and obtaining acceptance of authority.
Management accounting:	Used to aid in maximizing profit with emphasis on bureaucratic control, but accounting is neutral.	Used to provide information for planning and controlling to balance contributions.

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