THE GAP BETWEEN THEORY AND PRACTICE OF MANAGEMENT ACCOUNTING: SOME EXPLANATORY EVIDENCE FROM SRI LANKA

Abstract

The objectives of this study are three-fold: a) to assess the extent that Management Accounting (MA) function is established; b) to examine the extent of the gap between the theory and practice of Management Accounting; and c) to identify the salient contributory factors for the observed gap in relation to quoted public companies in Sri Lanka. The study covered forty five companies representative of five industry sectors. The questionnaire method accompanied by discussions with respondents was used to collect data. The research framework consisted of developing thirty six MA practices analyzed by Functions and Stages of Development. Data collected was subjected to a percentage-wise comparative analysis followed by a student’s t test for statistical significance. The majority of the companies in the sample showed that the MA function is not well established, sans a few exceptions. There is a wide variation in the use of MA practices across the five industry sectors. Analysis of MA practices indicates that companies are more bent towards Planning and Control and Internal Control functions while they also fall more into the Information for Planning and Control Stage of Development. The contributory factors for the gap observed could be traced into company specific, industry specific and extraneous factors. However, these are outward manifestations of a much larger problem; the mismatch between the MA practices and the socio-cultural context in which are these practices are expected to bring results. This is an issue that needs the early attention of companies, academic and professional institutions of education as well as the Government at policymaking level.

Keywords: Functions, Management Accounting, Practice, Stages of Development, Theory, Introduction

For full paper: fmscresearch@sjp.ac.lk