Management accounting or managerial
accounting is concerned with the
provisions and use
of accounting information to managers
within organizations, to provide them with
the basis to make informed business
decisions that will allow them to be better
equipped in their management and control
According to the Institute of Management
"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"
The American Institute of Certified Public
Accountants(AICPA) states that management
accounting as practice extends to the following three
• Strategic management—advancing the role of the management
accountant as a strategic partner in the organization.
• Performance management—developing the practice of business
decision-making and managing the performance of the
• Risk management—contributing to frameworks and practices for
identifying, measuring, managing and reporting risks to the
achievement of the objectives of the organization.
The Institute of Certified Management
"A management accountant applies his or her
professional knowledge and skill in the
preparation and presentation of financial and
other decision oriented information in such a
way as to assist management in the
formulation of policies and in the planning and
control of the operation of the undertaking".
Management accountants therefore are seen as the
"value-creators" amongst the accountants. They are
much more interested in forward looking and taking
decisions that will affect the future of the
organization, than in the historical recording and
compliance (score keeping) aspects of the profession.
Management accounting knowledge and experience
can therefore be obtained from varied fields and
functions within an organization, such as information
management, treasury, efficiency
auditing, marketing, valuation, pricing, logistics, etc.
The differences between management
accounting and financial accounting include:
• Management accounting provides information to people within an
organization while financial accounting is mainly for those outside
it, such as shareholders
• Financial accounting is required by law while management
accounting is not. Specific standards and formats may be
required for statutory accounts such as in the I.A.S International
Accounting Standard within Europe.
• Financial accounting covers the entire organization while
management accounting may be concerned with particular
products or cost centers.
Managerial accounting is used primarily by those
within a company or organization. Reports can be
generated for any period of time such as daily, weekly
or monthly. Reports are considered to be "future
looking" and have forecasting value to those within the
Financial accounting is used primarily by those outside
of a company or organization. Financial reports are
usually created for a set period of time, such as a fiscal
year or period. Financial reports are historically factual
and have predictive value to those who wish to make
financial decisions or investments in a company.
Financial Accounting Management/ Managerial Accounting
Financial accounting is used primarily by
those outside of a company or
organization. Financial reports are usually
created for a set period of time, such as a
fiscal year or period. Financial reports are
historically factual and have predictive
value to those who wish to make financial
decisions or investments in a company.
Managerial accounting is used primarily by
those within a company or organization.
Reports can be generated for any period of
time such as daily, weekly or monthly.
Reports are considered to be "future
looking" and have forecasting value to
those within the company.
Financial Accounting, on the other hand,
concentrates on the production of financial
reports, including the basic reporting
requirements of profitability, liquidity,
solvency and stability. Reports of this
nature can be accessed by internal and
external users such as the shareholders,
the banks and the creditors.
Management Accounting is the branch of
Accounting that deals primarily with
confidential financial reports for the
exclusive use of top management within an
organization. These reports are prepared
utilizing scientific and statistical methods to
arrive at certain monetary values which are
then used for decision making. Such
reports may include:
-Sales Forecasting reports, budget
analysis and comparative analysis,
feasibility studies, Merger and
Management accounting principles (MAP) were developed
to serve the core needs of internal business managers to
improve decision support objectives, internal business
processes, resource application, customer value, and capacity
utilization needed to achieve corporate goals in an optimal
Another term often used for management accounting
principles for these purposes is managerial costing principles.
The two management accounting principles are:
• Principle of Causality (i.e., the need for cause and effect insights) and,
• Principle of Analogy (i.e., the application of causal insights by managers
in their activities).
These two principles serve the management
accounting community and its customers –
the managers of businesses.
The principles are incorporated into the
Managerial Costing Conceptual Framework
(MCCF) along with concepts and constraints
to help govern the management accounting
practice. The framework ends decades of
confusion surrounding management
accounting approaches, tools and techniques
and their capabilities.
The framework of principles, concepts, and
constraints will drive the classification of
management accounting practices in the
profession to "enable a better understanding both
inside the profession and outside, of the
compromises that result from inappropriate
Without foundational principles, managers and
accounting professionals have no consistent
footing on which to challenge or evaluate new
theories of methods for managerial costing.
Some management accounting methods are designed
primarily to serve and comply with financial
The importance of having distinct and separate principles
exclusively for Management Accounting has received support
and acknowledgement after almost a century of work on the
The idea that separate management accounting principles
exist for managerial decision support distinct from financial
reporting needs is now recognized by professional accounting
bodies such as theInternational Federation of
Accountants Professional Accountants In Business
Committee and the Institute of Management
Accountants Managerial Costing Conceptual Framework
(MCCF) Task Force.