Managerial Accounting
Managerial accounting is the process of identifying,
measuring, analyzing, interpreting and communicating information for the
pursuit of an organization's goals. This branch of accounting is also known ascost accounting. The key difference between managerial and financial accounting
is managerial accounting information is aimed at helping managers within the
organization make decisions, while financial accounting is aimed at providing
information to parties outside the organization.
Managerial accounting encompasses all fields of accounting
aimed at informing management of business operation metrics. Managerial
accountants use information relating to the costs of products or services
purchased by the company. Budgets are also extensively used as a quantitative
expression of the business’ plan of operation. Individuals in managerialaccounting utilize performance reports to note deviations of actual results from
budgets.
Margin Analysis
Managerial accounting handles margin analysis, the amount of
profit or cash flow generated by the sale from a specific product, customer,
store or region. Margin analysis involves analyzing the incremental benefit
attained by increased production and flows into breakeven analysis. Breakeven
analysis involves calculating the contribution margin on the sales mix to
determine the unit volume at which the business’ gross sales equal total
expenditures. This information calculated by managerial accountants is useful
for determining price points for products and services.
Constraint Analysis
Managerial accounting also manages constraints within a
production line or sales process. Managerial accountants determine where
principle bottlenecks occur and calculate the impact of these constraints on
revenue, profit and cash flow.
Capital Budgeting
Managerial accounting involves utilizing information related
to capital expenditure decisions. Managerial accountants utilize standard
capital budgeting metrics such as net present value and internal rate of return
to assist decision makers on whether to embark on capital-intensive projects or
purchases. Managerial accounting involves examining proposals, deciding if the
products or services are needed, and finding the appropriate way to finance the
purchase. It also outlines payback periods so management is able to anticipate
future economic benefits and when they will occur.
Trend Analysis/Forecasting
Managerial accounting involves reviewing the trendline for
certain costs and investigating unusual variances or deviations. This field of
accounting also utilizes previous period information to calculate and project
future financial information. This may include the use of historical pricing,
sales volumes, geographical locations, customer tendencies or financial
information.
Product Costing/Valuation
Managerial accounting deals with determining the actual
costs of products or services. Managerial accountants calculate and allocate
overhead charges to property assess the true expenses related to the production
of a product. The overhead expenses may be allocated based on quantity of goods
produced or other drivers related to the production, such as square foot of the
facility. In conjunction with overhead costs, managerial accountants use direct
costs to properly assess the cost of goods sold and inventory that may be in
different stages of production.
Comments
Post a Comment