Managerial Accounting

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Managerial accounting, also known as cost accounting, is a type of accounting that is used by managers to make business decisions. This type of accounting takes place internally and generates information that managers use to plan for the future and change business operations. Often, managerial accounting is used to audit department expenses to save money and increase profitability.

A business typically employs internal and external accounting processes. External accounting, also known as financial accounting, uses independent auditors to prepare information on the company's finances for outside parties. Independent auditors are usually engaged once a year to prepare business taxes and financial statements. Conversely, internal accounting prepares financial information for use by the company's managers. It is a process that managers can initiate at any time. Consequently, financial accounting must conform to national standards, while managerial accounting must only conform to company standards.

Managerial accounting is often used to make cost-cutting decisions. Typically, an internal accountant audits a department or process with the company's specific goals and objectives in mind. The accountant produces a report that can identify the components with the highest costs. This type of accounting input enables managers to take corrective actions to increase the company's profitability. Read more about managerial accounting from the links on this Business.com page.


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