Throughput Accounting (TA) is an alternative to Cost Accounting proposed by Eliyahu M. Goldratt . In Management accounting, cost accounting is that part of management accounting which establishes budget and actual cost of operations processes departments or product and Eliyahu M Goldratt (1948 -) is an Israeli physicist turned business consultant Throughput Accounting  is not costing and it does not allocate all costs to products and services. It is a Management Accounting technique used as the performance measures in the Theory of Constraints. Management accounting is concerned with the provisions and use of Accounting information to managers within organizations to provide them with the basis to make informed business Theory of Constraints (TOC is an overall Management philosophy. It can be viewed as business intelligence for profit maximization but unlike Cost Accounting that primarily focuses on 'cutting costs', Throughput Accounting focuses on generating more Throughput. Conceptually, Throughput Accounting seeks to increase the velocity or speed at which Throughput (see definition of T below) is generated by products and services with respect to an organizations' constraint whether it is internal or external to the organization.
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, and, overall effectiveness of the whole organization. It is an internal reporting tool. Outside or external parties to a business depend on accounting reports prepared by financial (public) accountants who apply Generally Accepted Accounting Principles(GAAP) issued by the Financial Accounting Standards Board (FASB) and enforced by the U.S. Securities and Exchange Commission (SEC) and other local and international regulatory agencies and bodies. Generally Accepted Accounting Principles (GAAP is the standard framework of guidelines for Financial accounting. The Financial Accounting Standards Board (FASB is a private Not-for-profit organization whose primary purpose is to develop generally accepted accounting principles The US Securities and Exchange Commission (commonly known as the SEC) is an independent agency of the United States government which holds primary responsibility
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 (throughput, investment (AKA inventory), and operating expense — defined below). In the business management Theory of Constraints, throughput is the rate at which a System achieves its goal Investment or investing is a term with several closely-related meanings in Business management, Finance and Economics, related to saving Inventory is a list for goods and Materials, or those goods and materials themselves held available in stock by a Business. An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an on-going cost for running a product
When cost accounting was developed in the 1890's, labor was the largest fraction of product 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.
Goldratt 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.
Goldratt's alternative begins with the idea that each organization has a goal and that better decisions increase its value. The goal for a profit maximizing firm is easily stated, to increase profit, now and in the future. Throughput accounting applies to not-for-profit organizations too, but they have to develop a goal that makes sense in their individual cases.
Throughput Accounting also pays particular attention to the concept of 'bottleneck' (referred to as constraint in the Theory of Constraints) in the manufacturing or servicing processes.
Throughput Accounting uses three measures of income and expense:
Organizations that wish to increase their attainment of The Goal should therefore require managers to test proposed decisions against three questions. The Goal is a novel by Dr Eliyahu M Goldratt, the business consultant who created the Theory of Constraints model for systems management Will the proposed change:
The answers to these questions determine the effect of proposed changes on system wide measurements:
These relationships between financial ratios as illustrated by Goldratt are very similar to a set of relationships defined by DuPont and General Motors financial executive Donaldson Brown about 1920. In Communication networks, such as Ethernet or Packet radio, throughput is the average rate of successful message delivery over a communication channel Inventory is a list for goods and Materials, or those goods and materials themselves held available in stock by a Business. An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an on-going cost for running a product In business and finance accounting, net profit is equal to the Gross profit minus overheads minus Interest payable plus/minus one off items for In Finance, rate of return ( ROR) also known as return on investment ( ROI) rate of profit or sometimes just return, is Productivity in Economics refers to measures of output from production processes per unit of input E I du Pont de Nemours and Company (,) is an American chemical company that was founded in July 1802 as a Gunpowder mill by Eleuthère Irénée General Motors Corporation ( GM) ( is a multinational automobile manufacturer founded in 1908 and headquartered in the United States. Donaldson Brown (1885-1965 was a financial executive and corporate director with both DuPont and General Motors Corporation. Year 1920 ( MCMXX) was a Leap year starting on Thursday (link will display 1920 of the Gregorian calendar Brown did not advocate changes in management accounting methods, but instead used the ratios to evaluate traditional financial accounting data.
Throughput Accounting  is an important development in modern accounting that allows managers to understand the contribution of constrained resources to the overall profitability of the enterprise. See Cost Accounting for practical examples and a detailed description of the evolution of throughput accounting. In Management accounting, cost accounting is that part of management accounting which establishes budget and actual cost of operations processes departments or product and
One of the most important aspects of Throughput Accounting is its relevance. Throughput Accounting reports what currently happens in business functions such as operations, distribution, marketing etc. It does not solely rely on GAAP's 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. Throughput Accounting is used in Critical Chain Project Management (CCPM) , Drum Buffer Rope (DBR) - in businesses that are internally constrained, Simplified Drum Buffer Rope (S-DBR)  - in businesses that are externally constrained particularly where the lack of customer orders denotes a market constraint, in strategy, planning and tactics, etc.