Uncertainty and Management Accounting: Opportunity, Profit Opportunity, and Profit

  • Akira Nishimura


This chapter, in relation to ‘value concept’ in the previous chapter, considers the concept of profit in the management cycle, from uncertainty through probability of profit to realization of profit, and reexamines the meanings of profit and risk management in management accounting. As the business management environment becomes more changeable, complicated, and difficult to predict, top leaders in business organizations must more accurately forecast opportunities and risks. Accounting profit tends to be far removed from real-world opportunity. Thus, management accounting that relies on accounting profit can become irrelevant to real business management. This chapter reviews the literature on the relationship between uncertainty and profit management with the goal of clarifying the meaning of profit opportunity, which cannot exist without opportunity forecasting and the objective understanding and control of the organizational structure. At the same time, this chapter focuses on the importance of continuously paying attention to uncertainty in the business management cycle and the ability of people to perceive risk. The management cycle from opportunity through profit opportunity to realization of profit is presented as a circular model with feed-forward and feedback controls.


Opportunity Profit opportunity Profit management Uncertainty Organizational structure 


  1. American Accounting Association. (1966). A Statement of Basic Accounting Theory. Evanston: AAA.Google Scholar
  2. Anthony, R. N. (1965). Planning and Control Systems: A Framework for Analysis. Boston: Division of Research, Graduate School of Business Administration, Harvard University.Google Scholar
  3. Berle, A. A., & Means, G. C. (1932). Modern Corporation and Private Property. New York: Macmillan.Google Scholar
  4. Burnham, J. (1941). The Managerial Revolution: What Is happening in the World. New York: John Day.Google Scholar
  5. Chandler, A. D., Jr. (1977). The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Belknap Press of Harvard University Press.Google Scholar
  6. Collins, J. (2009). How the Mighty Fall and Why Some Companies Never Give in. New York: HarperCollins Publishers Inc.Google Scholar
  7. Demski, J. S. (1967, October). An Accounting System Structures on a Linear Programming Model. Accounting Review, 42(4), 701–712.Google Scholar
  8. Demski, J. S. (1969, October). Decision-Performance Control. Accounting Review, 44(4), 669–713.Google Scholar
  9. Ingrassia, P. (2011). Crash Course: The American Automobile Industry’s Road to Bankruptcy and Bailout—And Beyond. New York: Random House trade Paperbacks.Google Scholar
  10. Knight, F. H. (1921). Risk, Uncertainty and Profit. Chicago: University of Chicago Press. Reprint version: Cosimo Classic, New York, 2005.Google Scholar
  11. Kumarasinghe, S., & Willett, R. (2010). What Can Management Accounting Practitioners and Academics to Improve Risk Measurement and Foreworn Impending Financial Crises? Asia-Pacific Management Accounting Journal, 5(2), 1–10.Google Scholar
  12. Langlois, R. N. (2003). The Vanishing Hand: The Changing Dynamics of Industrial Capitalism. Industrial and Corporate Change, 12(2), 351–385.CrossRefGoogle Scholar
  13. Marx, K. (1867). Capital: A Critical Analysis of Capitalist Production, Volume 1. Moscow: Foreign Language Publishing House.Google Scholar
  14. Marx, K. (1965). Das Kapital: Kritik de politischen Ökonomie, Erster Band, Dietz Verlag Berlin (Capital: A Critical Analysis of Capitalist Production, Volume 1, Moscow: Foreign Languages Publishing House).Google Scholar
  15. Nishimura, A. (2003). Management Accounting in Asia: feed forward and Asian perspectives. Hampshire: Palgrave Macmillan.CrossRefGoogle Scholar
  16. Nishimura, A. (2005). Strategic Management and Contemporary Management Accounting. In A. Nishimura & R. Willett (Eds.), Management Accounting in Asia (pp. 1–8). Singapore: Thomson Learning. (A division of Thomson Asia Pte Ltd.).Google Scholar
  17. Nishimura, A. (2006a). Enterprise Governance and Management Accounting from the Viewpoint of Feed Forward Control. Asian-Pacific Management Accounting Journal, 1(1), 1–17. Public Knowledge Project (Open Journal System). Scholar
  18. Nishimura, A. (2006b). Analysis of Industrial Structure and Profitable Structure in China; Recent Development and Problems Chinese State-owned Enterprises: Structures of Industry and Deficit. Business Administration and Management Accounting in Asia (pp. 257–279 and 311–334), Tokyo: Chuou Keizai Publisher.Google Scholar
  19. Nishimura, A. (2006c). Business Management and Management Accounting in Asia (Japanese). Tokyo: Chuokeizai Publisher.Google Scholar
  20. Simon, H. A. (1969). The New Science of Management Decision. New York/Evanston: Herper & Row, Publishers.Google Scholar
  21. Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations, 423. New York: The Modern Library (reprinted in 1937).Google Scholar
  22. Sommer, S. C., & Loch, C. H. (2004, October). Selectionism and Learning in Projects with Complexity and Unforeseeable Uncertainty. Management Science, 50(10), 1334–1347.CrossRefGoogle Scholar
  23. Sommer, S. C., Loch, C. H., & Dong, J. (2009, January–February). Managing Complexity and Unforeseeable Uncertainty in Startup Companies: An Empirical Study. Organization Science, 20(1), 118–133.CrossRefGoogle Scholar
  24. The Wall Street Journal (2010, March 5). Japanese Version.

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Akira Nishimura
    • 1
  1. 1.Beppu UniversityBeppu-cityJapan

Personalised recommendations