Managerial accounting, Managerial Accounting

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Managerial Accounting

Before going to Managerial Accounting let us discuss a bit about Financial Accounting. Financial accounting is concerned with reporting to the external parties such as owners, creditors and analysts. These external users rarely have access to the information which is internal to the organization, and neither do they specify the correct information that will be presented. As an alternative, they may rely on the general reports presented by company. Consequently, the reporting structure is well standardized and defined. The methods and techniques of preparation and the reports presented are governed by the set of rules of various standard-setting organizations. In addition, the external users in general see only the summarized or aggregated data for the entity.

In contrast, the managers of a specific business many times desire or require far more detailed information. This information should be tailored to specific decision-making tasks of the managers, and its arrangement becomes more "free formed." Such managerial accounting information tends to be focused on the products, activities and department. In this context, the management process is intended to be a broad reference to encompass marketing, other disciplines and finance. Simply stated: managerial accounting is all about providing the information in support of the internal management processes. Various organizations refer to their internal accounting units as departments of the strategic finance. This title is more appropriate for their wide range and scope of duties.

Managerial accounting is pretty different from financial accounting. External reporting rules are replaced by the internal specifications as to how data are to be presented and accumulated. Expectantly, these internal specifications are adequately logical that they enable good economic decision making. For instance, specific reporting periods may be replaced with reach to real-time data that enable fast responses to the changing conditions. And, forecasted result become more critical for the planning purposes. Similarly, cost information must be disseminated in a way that managers can focus on  those business components ("segments") under their locus of control.

In brief, the remainder of this book is about the ideas and methods which can be used to provide accounting information in the direct support of the "broadly defined" role of managing the business organization. If you aim to work in strategic finance, the remainder is your introductory primer. But, for most of the readers -- those who must manage some part of an organization -- the remainder of is your guide to know how and when the management accountant's tools and devices can be used to help you to do the jobs better

Professional Certifications in Management Accounting

You should be familiar with the CPA (certified public accountant) designation; it is largely held and recognized. The certification is generally accompanied by a state issued license to practice the public accounting. Though, there are also CMA (certified management accountant) and CFM (certified financial manager) designations. These are not "licenses," per se, but they do represent significant competency in the managerial accounting and financial management skills. These certifications are sponsored by Institute of Management Accountants.


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