Management accounting is the practice of defining, measuring, analyzing, translating and communicating financial information to managers to find organizational goals.
What is management accounting?
Management Accounting (also known as Accounting, Expense Accounting or Management Accounting) is an accounting branch that deals with the identification, measurement and interpretation of accounting information, so it can be used to assist managers in making informed business decisions. Information.
Unlike financial accounting, which focuses primarily on coordinating and reporting on a company's financial transactions to outsiders (for example, investors, lenders), management accounting focuses on internal reporting to make decisions.
Accountants, managers need to analyze events and operational metrics to translate data into useful information that can be managed by company management in their decision-making process. They aim to provide detailed information regarding the company's operations by analyzing individual products, operating activities, locations.
Management Accounting Techniques
To achieve accounting goals, accounting must rely on a variety of techniques, including: Margin analysis Margin analysis is primarily concerned with the added benefits of increasing productivity.
1 Margin analysis is one of the most important and necessary techniques in management accounting. It includes raw material calculations that determine the best selling mix for a company product.
Barrier Analysis An analysis of a business's production chain identifies major inefficiencies created by these barriers and their impact on a company's ability to generate revenue and profits.
3. Capital Budget Capital management is concerned with analyzing the information needed to make the necessary decisions regarding capital expenditures. In capital budget analysis, the accountant calculates the net present value (NPV) and internal rate of return (IRR) to assist the manager in making new budget decisions.
4. Inventory and product prices Inventory evaluation involves identifying and analyzing actual costs related to the company's products and inventory. The process generally implies the calculation and allocation of costs, as well as the direct cost assessment of the cost of goods sold (COGS).
5. Trend Analysis and Forecast Trend analysis and forecasting is primarily concerned with the identification of product price patterns and trends, as well as the recognition of unusual differences from projected prices. And the reasons for such variations.
Relevant Reading Thank you for reading the CFI Handbook of Management Accounting. CFI is the official provider of the Global Financial Analyst Certification (FMA) Certification and Evaluation Program, designed to help anyone become a world-class financial analyst. To further your career, the following additional CFI resources will be helpful:
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