Defining Managerial Accounting

Final Paper

BUS630: Managerial Accounting

Dr. Barrett

5.13.2013

Defining Managerial Accounting

Managerial accounting is concerned with the provision and use of accounting information to managers within organizations, to facilitate the managers in their decision making and management control functions (Hopwood, 2008). Unlike financial accounting information, mainly used for public availability, managerial accounting information is used within an organization and is usually confidential. The distinction between traditional and innovative management accounting practices can be illustrated by reference to cost control techniques. Traditionally, management accountants' principal cost control technique was variance analysis, which is a systematic approach to the comparison of the actual and budgeted costs of the raw materials and labor used during a production period. While some form of variance analysis is still used by most manufacturing firms, it nowadays tends to be used in conjunction with innovative techniques such as lifecycle costing and activity-based costing, which are designed with specific aspects of the modern business environment in mind (2008). Managerial accounting is also defined as the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies, and tax authorities (2008). Without the proper use of managerial accounting in organizations today, failure of many companies would be imminent.

Role of Managerial accounting and the Managerial Accountant

Managerial accounting provides both a historical record of the immediate past and a future planning tool (Johnson,...