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Definition

Managerial accounting

Managerial accounting also called management accounting, is a field of accounting that provides economic and financial information for managers and other internal users.

The activities that are part of managerial accounting are as follows.

  1. Explaining manufacturing and nonmanufacturing costs and how they are reported in the financial statements.
  2. Computing the cost of providing a service or manufacturing a product.
  3. Determining the behavior of costs and expenses as activity levels change and analyzing cost-volume-profit relationships within a company.
  4. Assisting management in profit planning and formalizing these plans in the form of budgets.
  5. Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs.
  6. Accumulating and presenting data for management decision making.

 Managerial accounting applies to all types of businesses- service, merchandising, and manufacturing. It also applies to all forms of business organizations- proprietorship, partnership, and corporations. Managerial accounting is needed in not-for-profit entities as well as in profit-oriented enterprises.

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