Managerial or Management Accounting

Managerial or Management Accounting

The financial reports your tax accountant, investors or banker requires every year are much simpler and may look very different than the financial reports you as the business owner, founder, or manager need to see. Outsiders are interested in seeing the results of the financial accounting of your business. You, on the other hand, are interested in many more details regarding how the business is performing.

 

Managerial accounting takes a lot more thought and creativity than financial accounting. Not every bookkeeper or accountant works on managerial accounting (aka management accounting). Managerial accounting or management accounting is the accounting of resources of an organization to ensure optimum utilization. It provides top management with the proper insight into their business operations so that they can optimize the utilization of resources and streamline operations. Its objectives are:

  • To make important decisions
  • Plan for future business activities
  • Evaluate and monitor performance
  • Assist in decision making
  • To make proper use of resources

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What’s the Difference Between Financial and Managerial Accounting?

Financial Accounting (External)

  • Provides a historical perspective
  • Company-wide reports
  • Must follow prescribed formats
  • Reports are provided monthly or quarterly.
  • Types of reports usually include Profit & Loss (Income Statement), Balance Sheet, and Cash Flow Statement.

Managerial Accounting (Stakeholders/Management)

  • Future emphasis

  • Focus on segments of the business (by department, by location, by projects, etc.)

  • Not bound by any rules and more flexible

  • Reports are provided as frequently as needed.

  • Types or reports are internal such as job cost report, cost of goods sold or manufactured, production reports, profitability by product, sales rep, project, and so on

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