Mental Accounting and the Balanced Scorecard

Subject Areas : Management Accounting

F. Rahnamay Roodposhti ¹ , Arezoo Jalili ²

1 - Corresponding Author,
2 - ندارد

Received: 2010-03-09 Accepted : 2010-06-15 Published : 2010-03-21

Keywords: mental accounting, Balanced Scorecard, value function, framing, mental accounts, Prospect theory,

Abstract :

In this article, the relevant assumptions and principles of BSC, the overalldeterminants of mental accounting, the relationship and potential challenges betweenthese two new concepts were studied in a given competitive and dynamicenvironment. First, the various criteria of BSC were reviewed, while the symmetricalaspect of such criteria has been emphasized. In continuation, the key concepts ofmental accounting such as: Framing, Value Function, and the Separate MentalAccounts were explained and detailed.Different researches show that type of measure (financial or non financial) andoutcome relative o target (success or failure) interact significantly to affectperformance evaluations. Our results suggest that the assumed benefits of a balancescorecard may challenge by mental accounting. Also, cost of providing multiplemeasures does not outweigh the benefits of improved performance evaluations.