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What is Managerial Accounting?

What is Managerial Accounting?

  • July 31st, 2014
  • jrhassociates
  • Comments Off on What is Managerial Accounting?

When your company is made up of multiple departments that work together toward a common goal, it’s integral to your company’s success that the department heads remain on the same page as one another. Your department heads will likely come across different elements while overseeing daily operations that could be better managed or made more efficient if strategies were employed differently or if resources were used in another way. For this reason, many companies bring their department heads together for managerial accounting meetings, wherein they discuss the company’s efficiency and profitability.

What is Managerial Accounting?

Managerial accounting discussions allow department heads to determine what expenses should be reduced or eliminated if they’re proving to be too costly for the company. Likewise, these discussions provide an opportunity to evaluate the performance of projects and projects, ultimately deciding which should continue and which should be shut down.

Managerial accounting is important for the purposes of connecting your mid-level management with your executives, giving them a platform on which they can discuss the financial condition of the company and what needs to be done to either improve or maintain its profitability. Whether there’s a concern about the accuracy of the company’s financial reporting, cost monitoring, or agreements with vendors, there are often ways to improve operations, which often are put into action as a result of managerial accounting discussions. If it appears as though the company is spending too much on a particular product or supply, for example, the head of whichever department is responsible for obtaining that item can reach out to the vendor to inquire about rebates or discounts to reduce cost, or investigate alternative vendors who can meet the company’s demand at a lower price point.

Managerial accounting is often confused with financial accounting, but the two are definitely not one in the same. Managerial accounting, which is often also called cost accounting, is done in order to help your department heads, or managers, make decisions to improve the efficiency and profitability of the company within their particular departments. Financial accounting provides similar information about the company’s financial condition and profitability, but that information is being given to parties that exist outside of the company, such as investors and other organizations.

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