Purpose of Managerial Accounting

Managerial accounting is an activity that provides financial and nonfinancial information to an organization’s managers and other internal decision makers.

This section explains managerial accounting (sometimes known as management accounting) and contrasts it with financial accounting. The financial accounting system's primary function is to generate general-purpose financial statements. For internal decision makers who govern organizations, this knowledge is insufficient.

Purpose of Managerial Accounting

Both management accounting and financial accounting serve the objective of giving helpful information to decision makers. They accomplish this by gathering, managing, and reporting information requested by their users. Both fields of accounting share the practice of reporting monetary information, however management accounting also involves nonmonetary information reporting. They even report on some of the same data. For example, a company's financial statements contain information that is beneficial to both its management (insiders) and other individuals who are interested in the organization (outsiders).

The remainder of this book delves further into management accounting information, how to collect it, and how managers use it. We look at budgeting, break-even analysis, product costing, profit planning, and cost analysis, as well as other issues related to determining the costs of products and services. Many managerial choices require information about the price of products and services. Predicting the future expenses of a product or service is one of these considerations. Predicted costs are used to determine product price, profitability, and whether to manufacture or purchase a product or component. In general, most of management accounting is acquiring cost information for planning and control choices.


 is the process of setting goals and making plans to achieve them. Companies formulate long-term strategic plans that usually span a 5- to 10-year horizon and then refine them with medium-term and short-term plans. Strategic plans usually set a firm’s long-term direction by developing a road map based on opportunities such as new products, new markets, and capital investments Given its long-term emphasis, the aims and objectives of a strategic plan are widely specified. Short-term and medium-term plans are more operational in nature. They turn the strategic blueprint into concrete actions. These plans are more solid, with more clearly defined objectives and goals. A short-term plan frequently includes a one-year period, which is known as a budget when translated into monetary terms.


 The process of monitoring and analyzing an organization's actions and workers is known as control. It entails measuring and evaluating behaviors, processes, and outcomes. Managers can adjust their plans thanks to the feedback supplied by the control function. Measuring activities and processes also enables managers to take remedial steps in order to avert unfavorable results. Managers, for example, compare actual outcomes to projected results on a regular basis. The exhibit depicts the critical management roles of planning and control.

Purpose of Managerial Accounting

Resources : fundamental accounting principles 20th edition (pdf) John J. Wild , Ken W. Shaw Barbara Chiappetta
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