Tag Archive | algebra

Algebra in management accounting

Many years ago when I work in an accounting practice, we had a client who kept no wage records for a while. All we had was the net pay of each employee. We needed to get the gross pay, as well as the tax and social insurance, to do proper accounts and sort out the taxes owed. Back then we had no software to do this. So what did we do?

Well, we used algebra. We knew tax and social insurance rates and these were all a percentage of gross pay. We ended up with something like this :

G – 0.20G – 0.07G= Net

So we solved for G. It’s a bit more complicated today as back then the social insurance was a flat rate – and what I show above is only illustrative. What made me think about this past experience was a CIMA post about how we still use algebra in many management accounting tasks today – read more here.

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