There is a pandemic in the accounting profession in businesses across the United States. This problem has been festering for years and is in dire need of fixing. Somehow American companies, large and small, have lost their way. But this has nothing to do with Enron. The accounting industry has lost sight of their most important clients: management. According to a July 2003 study done by the Institute of Management Accountants and Ernst and Young, 98% of managers believe their cost data is distorted while almost 40% believe their cost data is significantly distorted. Management is not getting accurate information to make decisions, and if 98% of managers recognize this fact, we need a new solution that supports decision making.

Resource Consumption Accounting (RCA) is an emerging management accounting method. RCA is easier to understand, provides better decision-support, produces more accurate results, and may be the first accounting system praised by non-accountants and managers.

This article is from the Accounting Instructors’ Report, an electronic journal that provides teaching tips and insights to those who teach accounting and other business courses.

Contributor:
Shirley A Polejewski PhD, Professor of Accounting, University of St. Thomas

 

Read Resource Consumption Accounting.