Theory of Constraints and Throughput Accounting
Jaap de Jonge, Management Consultant, Netherlands
Indeed "Throughput Accounting" is a management accounting technique that identifies factors that limit an organization from reaching its goal. It was was proposed by Eliyahu M. Goldratt as an alternative to traditional cost accounting.
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.
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.
Unlike cost accounting that primarily focuses on 'cutting costs' and reducing expenses to make a profit, Throughput Accounting primarily focuses on generating more throughput.