Managerial Accounting Meaning, Pillars,

and Types
What Is Managerial Accounting?
Managerial accounting is the practice of identifying, measuring, analyzing,
interpreting, and communicating financial information to managers for the
pursuit of an organization's goals.

Managerial accounting differs from financial accounting because the intended

purpose of managerial accounting is to assist users internal to the company
in making well-informed business decisions.

KEY TAKEAWAYS

 Managerial accounting involves the presentation of financial information

for internal purposes to be used by management in making key
business decisions.
 Techniques used by managerial accountants are not dictated by
accounting standards, unlike financial accounting.
 The presentation of managerial accounting data can be modified to
meet the specific needs of its end-user.
 Managerial accounting encompasses many facets of accounting,
including product costing, budgeting, forecasting, and various financial
analysis.
 This differs from financial accounting, which produces and
disseminates official financial statements for public consumption that
conform to prevailing accounting standards.

Investopedia / Jessica Olah

How Managerial Accounting Works

Managerial accounting aims to improve the quality of information delivered to
management about business operation metrics. Managerial accountants use
information relating to the cost and sales revenue of goods and services
generated by the company. Cost accounting is a large subset of managerial
accounting that specifically focuses on capturing a company's total costs of
production by assessing the variable costs of each step of production, as well
as fixed costs. It allows businesses to identify and reduce unnecessary
spending and maximize profits.

The pillars of managerial accounting are planning, decision-making, and

controlling. In addition, forecasting and performance tracking are key
components. Through this focus, managerial accountants provide information
that aims to help companies and departments in these key areas.

Managerial Accounting vs. Financial Accounting

The key difference between managerial accounting and financial accounting
relates to the intended users of the information. Managerial accounting
information is aimed at helping managers within the organization make well-
informed business decisions, while financial accounting is aimed at providing
financial information to parties outside the organization.