What is managerial accounting?

Managerial accounting is also known as management accounting and it includes many of the topics found in cost accounting.

Some managerial accounting topics focus on computing a manufacturer's product costs that are needed for the external financial statements. For example, the manufacturer's income statement must report the actual cost of the products sold, and its balance sheet must report the actual costs in its ending inventories. The managerial accounting topics needed for these calculations include: product vs. period costs, job order costing, process costing, allocation of manufacturing overhead, costing of joint products, and more.

Other managerial accounting topics are more beneficial for planning and controlling a business and in helping management make financial decisions. These topics include:

  • understanding cost behavior and cost-volume-profit analysis
  • operational budgeting and capital budgeting
  • standard costing and variance analysis
  • activity based costing
  • pricing of individual products and services
  • analyzing the profitability of product lines, customers, territories, etc.

The appropriate and relevant amounts for these topics will likely be unaudited, estimated, and future amounts (instead of the past, sunk costs found in the general ledger). Management's focus on these managerial accounting topics can make a difference in a company's profitability.