Debitoor Dictionary

Accounting terms explained in a simple way

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Management accounting - What is management accounting?

Management accounting involves preparing and providing timely financial and statistical information to business managers so that they can make day-to-day and short-term managerial decisions

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Management accounting (also known as managerial or cost accounting) differs from financial accounting in that it produces reports for a company’s internal stakeholders as opposed to external stakeholders.

The result of management accounting is periodic reports for the company’s department managers and CEO, for example.

Management accounting reports often include details of the company’s available cash, recent generation of sales revenues, the current state of the organisation’s accounts payable and receivable, and more.

What can be found in the report?

The information found in management accounting is vastly different than financial accounting in a number of ways. While financial accounting reports tend to be based on historical data, management reports are primarily forward-looking.

Management accounting reports are also usually confidential and for internal use only, as opposed to financial accounting statements, which are publically reported.

Also, instead of being calculated based on generally accepted accounting practices, they are calculated based on management’s informational needs.

The Institute of Management Accountants

The Institute of Management Accountants (IMA) describes management accounting in the following statement:

"Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy".