management accounting

Management Accounting is a branch of accounting focused on providing financial and non-financial information to internal management for decision-making, planning, and control purposes.

🔍 Definition:

Management accounting involves the process of identifying, measuring, analyzing, interpreting, and communicating information to managers to help them achieve organizational goals.

📊 Key Functions of Management Accounting:

Planning
Helps managers forecast future trends and make strategic decisions.

Controlling
Monitoring operations and comparing actual performance against budgets or plans.

Decision-Making
Providing relevant data to make informed business decisions.

Performance Measurement
Evaluating business units or employee performance.

Cost Management
Analyzing costs to control and reduce expenses.

📘 Examples of Management Accounting Tools:
Tool Purpose
Budgeting Planning future income and expenses.
Cost-Volume-Profit (CVP) Analysis Analyzing how changes in costs and volume affect profits.
Variance Analysis Comparing budgeted vs. actual performance.
Break-even Analysis Finding the point at which total revenue equals total cost.
Activity-Based Costing (ABC) Assigning overheads based on activities.
Balanced Scorecard Tracking performance using financial and non-financial metrics.
📌 Difference Between Financial and Management Accounting:
Feature Financial Accounting Management Accounting
Users External (investors, regulators) Internal (managers)
Focus Past performance Future planning and control
Regulation Follows GAAP/IFRS No strict rules
Frequency Periodic (quarterly, annually) As needed