What is Managerial Accounting:
Learning objectives of this article:
- What is managerial accounting?
- What are functions of managerial accounting?
Managerial accounting is concerned with providing information to managers that is, people inside an organization who direct and control its operation. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside an organization.
Managerial accounting provides the essential data with which the organizations are actually run. Managerial accounting is also termed as management accounting or cost accounting.Financial accounting provides the scorecard by which a company’s overall past performance is judged by outsiders. Managerial accountants prepare a variety of reports. Some reports focus on how well managers or business units have performed-comparing actual results to plans and to benchmarks.
Some reports provide timely, frequent updates on key indicators such as orders received, order backlog, capacity utilization, and sales. Other analytical reports are prepared as needed to investigate specific problems such as a decline in the profitability of a product line. And yet other reports analyze a developing business situation or opportunity. In contrast, financial accounting is oriented toward producing a limited set of specific prescribed annual and quarterly financial statements in accordance with Generally Accepted Accounting Principles (GAAP). (Ray H. Garrison Eric W Noreen 1999).
Managerial accounting is managers oriented therefore its study must be preceded by some understanding of what managers do, the information managers need, and the general business environment.
You may also be interested in other useful articles from “introduction to managerial accounting chapter”:
What is managerial accounting?
Difference between financial and managerial accounting (Financial accounting vs managerial accounting).
Need for managerial accounting information.
History of managerial accounting.
Code of conduct for management accountants.
The certified management accountants (CMA).