Application Of Throughput Accounting In Nigeria Import And Export Industries

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Throughput Accounting (TA) is a principle-based and simplified management accounting approach that provides managers with decision support information for enterprise profitability improvement (Wikipedia, 2015). TA is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behavior in key areas towards reaching organizational goals. TA was proposed by Eliyahu M. Goldratt as an alternative to traditional cost accounting. As such, Throughput Accounting is neither cost accounting nor costing because it is cash focused and does not allocate all costs (variable and fixed expenses, including overheads) to products and services sold or provided by an enterprise (Eliyahu, Goldratt & Cox, 2013). Considering the laws of variation, only costs that vary totally with units of output e.g. raw materials, are allocated to products and services which are deducted from sales to determine Throughput. Throughput Accounting is a management accounting technique used as the performance measure in the Theory of Constraints (TOC). It is the business intelligence used for maximizing profits, however, unlike cost accounting that primarily focuses on ‘cutting costs’ and reducing expenses to make a profit, Throughput

Accounting primarily focuses on generating more throughput (Corbett, 2014). Conceptually, Throughput Accounting seeks to increase the speed or rate at which throughput is generated by products and services with respect to an organization’s constraint, whether the constraint is internal or external to the organization. Throughput Accounting is the only management accounting methodology that considers constraints as factors limiting the performance of organizations (Noreen, 2009).

When cost accounting was developed in the 1890s, labor was the largest fraction of product cost and could be considered a variable cost. Workers often did not know how many hours they would work in a week when they reported on Monday morning because time-keeping systems were rudimentary. Cost accountants, therefore, concentrated on how efficiently managers used labor since it was their most important variable resource. Now however, workers who come to work on Monday morning almost always work 40 hours or more; their cost is fixed rather than variable.

However, today, many managers are still evaluated on their labor efficiencies, and many “downsizing,” “rightsizing,” and other labor reduction campaigns are based on them. Bragg (2015) argues that, under current conditions, labor efficiencies lead to decisions that harm rather than help organizations. Throughput Accounting, therefore, removes standard cost accounting’s reliance on efficiencies in general, and labor efficiency in particular, from management practice. Many cost and financial accountants agree with Goldratt’s critique, but they have not agreed on a replacement of their own and there is enormous inertia in the installed base of people trained to work with existing practices.

Management accounting is an organization’s internal set of techniques and methods used to maximize shareholder wealth. Throughput Accounting is thus part of the management accountants’ toolkit, ensuring efficiency where it matters as well as the overall effectiveness of the organization. It is an internal reporting tool (Corbett, 2014). Throughput Accounting improves profit performance with better management decisions by using measurements that more closely reflect the effect of decisions on three critical monetary variables.

The important role of exports and imports industry in the economy cannot be overemphasized. Exports and imports play an integral role in determining the trade balance of a country. As a result, the dynamics of the relationship between these two variables hold significant importance for the economy and have attracted the interest of researchers in testing the nature of relationships between exports and imports. This is because an unsustainable trade deficit indicates a violation of international budget constraints over time. If the trade deficits should persist, the domestic interest rates will be very high and such an economy will metamorphosed into a heavily indebted country which may affects the welfare of the citizens. However, accountability in the import and export industry in Nigeria will be effective if throughput accounting is applied in the sector because one of the most important aspects of Throughput Accounting is the relevance of the information it produces. Throughput Accounting reports what currently happens in business functions such as operations, distribution and marketing. It does not rely solely on financial accounting reports (that still need to be verified by external auditors) and is thus relevant to current decisions made by management that affect the business now and in the future.
The following are the objectives of this study:

  1. To provide an overview on throughput accounting.
  2. To examine the application of throughput accounting in import and export industry in Nigeria.
  3. To identify the factor limiting the effective application of throughput accounting in the import and export industry in Nigeria.


  1. What is throughput accounting?
  2. Can throughput accounting be applied in import and export industry in Nigeria?
  3. What are the factors limiting the effective application of throughput accounting in the import and export industry in Nigeria?

The following are the significance of this study:

  1. The results from this study will educate the general public, stakeholders in the accounting industry, government of Nigeria and policy makers on the effect of application of throughput accounting in the import and export industry in Nigeria with a view of identifying its effect on performance and accountability.
  2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic

This study on the application of throughput accounting in Nigeria import and export industry will cover the overview of throughput accounting and the outcome of the application of throughput accounting in Nigeria import and export industry.
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

Bragg Steven (2015) – Throughput Accounting – ISBN 978-0-471-25109-5.
Corbett Thomas (2014) – Throughput Accounting – ISBN 0-88427-158-7.
Eliyahu M. Goldratt and Jeff Cox (2013). – The Goal – ISBN 0-620-33597-1.
Noreen Eric (2009) – Theory of Constraints and its Implications for Management Accounting – ISBN 978-0-88427-116-1. Wikipedia, 2015.

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