Question

Managerial Accounting is concerned with providing information to managers so they may make business decisions that satisfy customers while continuously monitoring costs and improving efficiencies. Some reports provide timely updates on key indicators while others investigate problems such as declined profitability. Please list a report or activity you learned about in Managerial Accounting which would be useful if implemented in either a) a current or past place of employment or b) your personal life. Describe how the report would help in your job or personal life.

Answer 1

Generally: "Managerial accounting is concerned with providing information to managers—that is, to those who are inside an organization and who direct and control its operations. Managerial accounting can be contrasted with financial accounting, which is concerned with providing information to stockholders, creditors, and others who are outside an organization. Managerial accounting provides the essential data with which organizations are actually run. Financial accounting provides the scorecard by which a company’s past performance is judged." Ray W. Garrison & Eric W. Noreen, Managerial Accounting 4 (8th ed. 1997) (emphasis and bold in original).

Not mandatory: "Financial accounting is mandatory; that is, it must be done. Various outside parties such as the Securities and Exchange Commission (SEC) and the tax authorities require periodic financial statements. Managerial accounting, on the other hand, is not mandatory. A company is completely free to do as much or as little as it wishes. There are no regulatory bodies or other outside agencies that specify what is to be done, or, for that matter, whether anything is to be done at all. [Because] managerial accounting is completely optional, the important question is always, ‘Is the information useful [i.e., does the benefit of having the information outweigh the cost of compiling the information]?’ rather than, ‘Is the information required?’

What types of organizations use managerial accounting?

All types: All types of organizations including manufacturers, retailers, service industries, agribusiness, and non-profit firms use managerial accounting information.

Uses: All organizations have goals for growth, profit, quality, leadership, etc. and they use managerial accounting information to set and access their completion of these goals.

Needs: All organizations have informational needs in the financial, production, personnel, environmental, and legal areas. Managerial accounting provides some of this information.

Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an organization’s goals.

Integral part of process: Managerial accounting is an integral part of the management process and managerial accountants are important strategic partners in an organization’s management team.

Creating value: The management team seeks to create value for the organization by managing resources, activities, and people to achieve the organization’s goals effectively.

Focus on internal personnel needs: The focus in managerial accounting is primarily on the needs of personnel within the organization.

Management activities: The owners, directors, or trustees of an organization set its goals, often with the help of management. In pursuing its goals, an organization acquires resources, hires people, and then engages in an organized set of activities. It is up to the management team to make the best use of the organization’s resources, activities, and people in achieving the organization’s goals. The day-to-day work of the management team comprises four activities.

Objectives of Managerial Accounting

Providing information for decision making and planning: Virtually all major decisions by internal users (i.e., managers) rely largely on managerial accounting information.

1. Type of data: This information includes financial and nonfinancial data to help managers with strategic planning and decision-making (e.g., the cost of products, budgets, cash flows).