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What is lean accounting and what is it all about? Write a summary.

My instructor recommended that I read an article by Van der Merwe & A., Thomson, J. (2007, February). The lowdown on lean accounting. Strategic Finance, 88(8), 26-33.

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In simple terms lean accounting is meant for a lean enterprise. What is a lean enterprise? It means a firm that specifies value from the perspective of the customer; it identifies the value streams for each family of products and eliminates whatever does not create value. The value creating steams are in tight sequence, customers pull value from the next upstream activity and as value is specified waste steps are eliminated. Now to make this process work there are some changes required in the accounting of the firm.

The first problems were identified in case of standard costing. It was observed that standard costing produced negative results when lean strategies were sought to be introduced. Even if the performance evaluation measures were used, production managers built up large ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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