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Date Submitted: 08/28/2016 06:36 AM
QUESTION TWELVE - RESEARCH TOPICS
d) Lean Accounting
Lean Manufacturing, Lean Accounting
Many companies have begun to adopt ‘Lean’ manufacturing process, “a strategy designed to achieve the shortest possible production cycle by eliminating waste. The goal is to reduce inventory and produce only to meet customer demand.” This strategy aims to reduce costs improve quality and produce outputs more quickly. As the process has become more widely adopted aspects of “traditional accounting practices were inadequate and in fact a deterrent to the adoption of some of the necessary improvements to manufacturing operations” and as a result ‘Lean Accounting’ practices have developed focussing on “eliminating waste from the transaction processes, reports and accounting methods throughout the organization.”
Lean accounting is defined as “concepts designed to better reflect the financial performance of a company that has implemented lean manufacturing processes. These may include organizing costs by value stream, changing inventory valuation techniques and modifying financial systems to include non-financial information”.
The generally accepted practices for Lean Accounting were documented by Maskell and Baggaley and presented at the Lean Accounting Summit in 2006 as a culmination of work by “the leading lean manufacturing practitioners, consultants and academics to formalize and unify the work they had been doing independently.”
Key Concepts of Lean Accounting
The Value Stream
The lean accounting process uses the ‘value stream’ to report and record financial information. “The value stream is the complete sequence of activities within the organisation that operationally links the incoming supply chain with one or more outgoing distribution channels. As well as the complete sequence of associated business activities required to take a customer order from start to finish”. Examples of the expenses included are design costs, sales and marketing costs, and...