A Brief look at Managerial Accounting

Essay by winlook007 August 2006

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A day doesn't go by without Managerial Accounting in our capitalistic world we call, America. Whether we recognize it or not it's in our lives everywhere we turn. It can be seen in the company you work at to the fast-food chain you buy breakfast. Managerial Accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an organization's goals.

An organization needs resources and people to carry out the activities. The management team of the organization must achieve the goals with the resources, people and activities. The four important roles of a management team is decision making, planning, directing operational activities, and controlling. These four activities are impossible without the information from the managerial accountant analysis. The information that a managerial accountant analysis provides can be used in making day to day decisions or long term decision making. Most of the data provided is financial but some organizations are also using substantial non-financial data.

(Hilton, 4)

What's the difference between Financial Accounting and Managerial Accounting? Unlike Financial Accounting, Managerial Accounting focuses on the managers within the organizations, rather than interested parties outside the organization. Financial Accounting is the use of accounting information for reporting to interested parties outside the organization. The outside parties are people like stockholders, lenders, investment analysts, unions, consumer groups, and government agencies. Financial Accounting and Manage-rial Accounting have some similarities despite their differences. They both gather data from the organizations basic accounting system. (Hilton, 4)

They are different cost for different purposes. The meaning of cost can change when it is used in different context. Cost can be defined as the sacrifice made, usually measured by the resource given up, to achieve a particular purpose. The activity that causes cost to be incurred is called cost drivers. Activity refers to...