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Accounting For Throughput by David Dugdale and T Jones

In my review of the book

Accounting For Throughput

by David Dugdale and T Jones posted on Amazon.co.uk, I gave it Three Stars. This means Worthwhile.

Here is my review.

An early look at Accounting for Throughput consistent with the Theory of Constraints

This book is now 20 years old.

It was written at a time when there was plenty of criticism of traditional absorption based costing from

  • Theory Of Constraints (TOC) advocates,
  • from those who believed in Activity Based Costing and
  • those who believed that there was too much focus on financial performance when non-financial performance indicators would chart progress better.

This presents the TOC side of the argument where it is believed that the main purpose is to support actions that will increase throughput (at that time sales revenue minus direct material costs) rather than the old “cost world” which aimed to reduce costs and improve (false) efficiencies.

The fact that fixed and variable cost production overheads need to be included in stock and work in progress valuations for statutory accounts for Companies House and HMRC because that’s what the accounting standards say means that Throughput Accounts and Absorption Cost Accounts need to be reconciled. The first is used to guide internal decision making whilst the second is used to report progress to the outside world.

It does a good job of summarising the situation at that time including a detailed look at one company in the UK that had implemented Eli Goldratt’s product planning software, taken up his ToC ideas and found their traditional costing system a barrier to progress.

It presents a balanced case highlighting the void around department measures when the old costing reports were removed and works supervisors were no longer judged on efficiencies compared to standard costs.

Back when it first came out, I would have probably rated this as at least a 4 star book. However 20 years have past and ToC has developed as it has been implemented in more businesses. Accounting for ToC will have also moved forward so this book only tells the first half of the story, even if it has the main plot lines. That’s cost it a star when I rate it in but I still think it’s worth reading if you’re interested in introducing a style of Throughput Accounting.

There are many thousand of business books, you can see the full list of my reviews at Business Books Reviews by Paul Simister (Please click). I've also narrowed these down to a list of the 12 Best Business Books For Business Owners & Entrepreneurs (Please click).

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