Management accounting is defined by BusinessDictionary.com as “the process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day to day and short term decisions” (businessdictionary.com). The purpose of managerial accounting is to periodic reports for the chief executive officer, company managers and other entities internal to the company that will enable them to make decisions that will help to make the company profitable. These reports include trend charts, statistics and other analysis as well as typical accounting information like accounts receivable, sales revenue and outstanding debts.
It is important for managers to understand and be familiar with managerial accounting and how it can be beneficial to their decision making and successful company operations regardless of the type of business. It combines accounting and management to make better decisions for the company. Firstly, they advise managers of the impact that future projects will have on the company’s operations and if they are worth the effort and add value to the company’s bottom line. Secondly, it helps plan business strategy to efficiently use the company’s resources. Thirdly, they can help monitor spending to ensure that they are using their revenue efficiently. Lastly, management accounting can help with internal audits without the risk of penalty of fines from outside agencies that regulate accounting procedures.
Financial accounting and management accounting provide different information for different periods of time and are used by different entities. Financial accounting provides information for a specific period of time and gives a historical picture of how the company has performed in the past. The annual statements provide revenue, assets and liabilities along with additional information that investors and shareholders use to determine how the company performed for that particular period...