Management accounting is concerned with the provision and use of accounting information to managers within an organization, to facilitate their decision making and management control functions.
Financial Accounting vs Management Accounting
Objective
- Financial accounting
Stewardship for the benefit of shareholders. - Management accounting
Improve the economy, efficiency, and effectiveness of operations.
Time Horizon
- Financial accounting
Looks only at the past. - Management accounting
Looks at the past, present, and future.
Report Recipients
- Financial accounting
External parties, namely shareholders and government. - Management accounting
Internal parties, namely directors and managers.
Outputs
- Financial accounting
A summary annual statement of profit or loss and other comprehensive income, statement of financial position, and statement of cash flow. - Management accounting
Detailed monthly and annual management accounts by product and function, plus adhoc reports.
Regulating Framework
- Financial accounting
Accounting standards, accounting concepts, and statutory requirements under the Companies Act. - Management accounting
None prescribed.
Activities
- Explaining production and non-production costs and how they are reported in the financial statements.
- Computing the cost of providing a service or manufacturing a product.
- Determining the behavior of costs and expenses as activity levels change.
- Analyzing cost-volume-profit relationships within a company.
- Assisting management in profit planning and budgeting.
- Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs.
- Accumulating and presenting relevant data for management decision making.