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IMPACT OF INDUSTRIAL REVOLUTION ON ACCOUNTING (CA 1760 - 1840) image…
IMPACT OF INDUSTRIAL REVOLUTION ON ACCOUNTING (CA 1760 - 1840)
Industrial revolution lead to creation:
Factory systems
Banks
Secondary Industries (various manufacturing industries processing materials)
Big corporations
Rapid factory system expansion
Sophisticated accounting needed.
Creation of accounting sub categories
Cost accounting (emerged prominently with factory system)
Management accounting (emerged from cost accounting)
Costs to be assigned to manufacturing activities.
Cost
Accounting
Assigning activity costs (direct and indirect):
Labour costs
Factory rental
Factory maintainance
Non manufacturing costs (advertising, administration etc.)
Factory maintenance
Management Accounting
Provide financial /non- information to internal stakeholders:
Budget preperation
Record, plan and control activities for decision making.
Strategizing and implementation
Profit maximization and efficient management.
Economy growing exponentially
Expanding population; Expanding cities; Expanding communities (urbanization)
Increased state service dependence (roads; transport; waste; water etc.).
Formalised taxes.
Increased wealth and education.
Mainstream money economy
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