Traditional management accounting focused mainly on financial performance measures. More emphasis is now being given to incorporating non-financial measures into the formal reporting system. Financial indicators often reveal the ultimate effects of operational factors and decision but non-financial indicators are needed to monitor causes.
However, non-financial measures may be used as an additional tool to monitor performance and maximise long-term profitability.
The effectiveness of traditional accounting is a major concern as is not up to date and becomes unreliable, it lacks the capability to keep up with the needs of a continuous changes in the environment. This said traditional management become inefficient and lack the capability to cope with the continuity of the changes in the environment. (Askarany 2006).
Using variance aspect, standard cost concept is the scale used to determine variances it is generally based on traditional managerial means of reporting. The advantage is to improve cash and inventory planning concept, it also means to support the activity of such accounting-based work evaluation and other more.
Disregarding all the advantages, the traditional variance analysis system called as the standard cost concept of efficienct matters. the disadvantages are the interpretation of error free variances
Base on the many factors traditional management accounting system can no longer function however a new development for a accounting was introduced. The new system is called the Activity-based Costing or ABC (Dekker, 2001).
The Balance scorecard
The balance scorecard seeks to link performance measures to an organisation’s strategy in order to clarify, communicate and manage strategy.