Management Accounting
The practice of generating financial information for internal management use to support planning, decision-making, and control.
What is Management Accounting?
Management accounting (also called managerial accounting) is the process of identifying, measuring, analyzing, and reporting financial and non-financial information that managers use internally to plan operations, make decisions, and evaluate performance. Unlike financial accounting, which is governed by GAAP and directed at external stakeholders, management accounting has no mandatory format and can be tailored to the specific needs of each organization. Common management accounting tools include budgeting, variance analysis, break-even analysis, product profitability analysis, and the balanced scorecard. The primary professional certification in this field is the Certified Management Accountant (CMA).
Example
The management accounting team at a consumer goods company produces a monthly performance report showing actual sales revenue, cost of goods sold, and SG&A expenses against the annual budget by product line and region. When the report shows that the premium product line is $2 million over budget on raw material costs, management uses this variance analysis to investigate supplier pricing, adjust production volumes, or renegotiate contracts — decisions that would never appear in external financial statements but are critical for profitability management.