Definition of Managerial Accounting
Management accounting is also known as Managerial Accounting. It is a process where accounts, management reports and data are prepared with the objective of providing an organization’s management with accurate information and statistics in a timely manner. These information facilitates decision-making regarding operations and policy formulation. Therefore, the analysis of business activities, costs and operations for presentation to internal management are the useful components of management accounting.
Differences between Management Accounting and Financial Accounting
|Managerial Accounting||Financial Accounting|
|Mainly used for an organization’s internal purposes||Mainly used for organizations external purposes|
|Not mandated by any rules, regulations, or laws||Must be in conformity to given set standards within the law|
|Mainly used by an organization’s management||Mainly used by an organization’s external stakeholders including investors, shareholders, and the regulatory bodies|
|Its main objective is to support decision making within an organization||Support investment decisions and monitoring initiatives by external stakeholders|
|An organization is not obliged to prepare and present management accounts||Organizations must always prepare and present financial accounts|
|These accounts must not be audited||Financial accounts and statements must always be audited both internally and externally|
|The frequency of preparing and presenting management accounts is not predefined||Financial accounts and statements must be prepared and presented on an annual basis|
|These accounts have both the monetary and non-monetary elements.||
Only monetary elements form the financial accounts and statements
Advantages of Management Accounting
This branch of accounting is widely applicable in organizations because of the numerous benefits that it presents. Some of the advantages include:
- Enhancing organizational Decision making through the comprehensive information that it presents
- The periodic financial and non-financial information generated through management accounting are important for an organization’s effective planning.
- Management accounting also helps in the strategic management decision making processes in organizations
- Through the management accounts, it is easier to identify organizational problems or issues and correct them in time.
Functions of Management Accounting
Among many other roles, managerial accounting facilitates organizational process through the following:
- Profitability: This helps in the profit determination and consolidation from any organizational project or product line.
- Break-even analysis: Through management accounting, a business is able to determine when it actually starts making profits or loses to facilitate planning and decision marking regarding progress.
- Forecasting: By helping determine the weaknesses of an organization and the extent of its damage, an organization finds it easier to forge a future plan.
- Stock valuation: Management accounting reports and data presents all cost elements that are useful in valuing an organization’s worth.
- Capital budgeting: Management accounts, reports and statements analysis helps in the analysis and categorization of an organization’s investment needs and choice among the options available.
- Management accounting also supports the financial accounting process in the preparation and presentation of financial statements.
Unit 5 Management Accounting Assignment Solutions
Management accounting is highly detailed and complex. The accounts, reports and statements presented through the process offer a series of information and data ranging from cash availability, periodically generated sales revenues, the state of an organization’s individual accounts, orders, payables, receivables, inventory, raw materials, charts, several forms or analysis and statistics. However, if you have an interest and passion in pursuing this area of specialization in the accounting field you should not look back because you can seek accounting help services offered by experts.