Managerial accounting

Definition

Managerial accounting focuses on providing financial information within an organization to aid in decision-making, planning, and control processes. It is tailored for internal stakeholders like managers rather than external users such as investors or creditors.

5 Must Know Facts For Your Next Test

1. Managerial accounting emphasizes future projections and budgeting instead of historical data.
2. It includes the analysis of cost behavior and cost-volume-profit relationships.
3. Managerial accounting reports are typically more detailed and frequent compared to financial accounting reports.
4. It involves tools like variance analysis, performance metrics, and operational budgeting.
5. Unlike financial accounting, managerial accounting is not governed by standardized principles like GAAP or IFRS.

Review Questions

• What is the primary focus of managerial accounting?
• How does managerial accounting differ from financial accounting in terms of reporting frequency?
• Name two tools commonly used in managerial accounting.

Related terms

Cost-Volume-Profit Analysis: A method used to understand the relationship between costs, sales volume, and profits.

Variance Analysis:

The process of analyzing the differences between actual and budgeted figures to understand performance.

Budgeting:

The process of creating a plan to spend an organization's resources over a specified period.