VIJAY LAKSHMI MA RP.edited

School: University of the Cumberlands - Course: BACC 531 - Subject: Accounting

2 Lean Accounting System Overview The success of a lean accounting system is highly contextual, making it a multifaceted phenomenon. Numerous efforts have been made to establish and maintain an effective lean accounting system, but only a few studies have investigated the root causes of their failure. The fundamental goal of this study is to analyze the advantages of a lean accounting system and the reasons for its successful implementation. Consequently, conducted a thorough literature review. For a lean accounting system to be effective, it requires buy-in from senior management, the adoption of unified accounting practices, the availability of a lean manufacturing/operational framework, and the collaboration of all teams involved in the value stream. This study contributes to the literature by highlighting the several aspects that lead to a successful lean accounting implementation. These factors include the production system, conventional accounting, lean accounting, and top management involvement. Review of the Literature Lean requires a firm commitment to the philosophy of cost management. Consequently, cutting costs in areas other than the unit price is crucial. The full-costing methodology and other conventional pricing strategies might impede a seamless shift to lean operations. That is, since it takes much work to calculate and allocate costs using the conventional accounting system, which places a premium on precision in product costs and profits. It may simplify organizational cost allocation if businesses base their strategies on value streams (Stončiuvienė et al., 2020). In contrast to more traditional systems, lean accounting treats costs as fixed. Management has far less say over the budget when expenses are variable rather than fixed. That signifies that the corporation has authorized the relevant management to increase expenditure in several areas 3 to match the increase in revenue. Standard costing poses two major issues for a corporation adopting a lean business approach. As a first step, a lean company is operated by strict guidelines. Second, standard costing compares estimated costs with actual costs to establish efficiency. Businesses that practice lean management thrive by maximizing flow in response to client demand, and proponents contend that increasing resource utilization results in inefficient production and hoarding. Therefore, when traditional cost utilization and efficiency statistics are employed as performance assessments, the message is formed that operations are not improving and resources are being misused, even while operational performance is growing (Nielsen et al., 2021).