What is Management Accounting
Although financial accounting is perhaps the most important type of accounting there are
other types like management accounting that are as important.
So that you can learn about accounting.
Today’s post is looking at what is management accounting.
Management accounting is the process of preparing and providing up-to-date financial information to the managers of an entity.
The information should assist and support managers in making usual everyday decisions
as well as decisions for the short term.
In contrast to financial accounting, there is no legal requirement for an entity to provide
documents related to management accounting.
Another key difference is that management accounting has no standards or formats that
need to be followed.
Management accounting is provided for the users inside of an entity.
These include mainly management as well as owners and employees. And known in the previous
a video called “Who are the users of Accounting information” as internal users.
Management accounting can provide information that covers the entire entity or just a particular product or department known as a “cost centre”.
Also, it focuses on the future of an entity whereby financial accounting pays more attention
to the past.
This is Example Time! This is where we put the theory into so-called real-life examples.
This is to try and increase your understanding of the topic and theory.
Cara’s Cake company provides a variety of cakes, cookies, and other delicious foods.
The management accountants analyzed all the financial information from the past two years
of the cake department.
They found that the ice fingers and jam doughnuts performed well while on the other hand, the chocolate muffins were underperforming and causing the profits to decline.
The managers of Cara’s Cake company will have to make a decision using the information
provided to see whether they should keep selling all the products, stop production
of certain products or take other action such as increase or decrease the production costs
or even the selling price.
So that was the explanation of management accounting. If you enjoyed it, press the like
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best to answer it.
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