The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and budgeting, short- and long-term project decision making and operational measurement of performance.
What Is Managerial Accounting?
Managerial accounting is the process of identifying, analyzing, recording and presenting financial information so internal management can use it for the planning, decision making and control of a company.
This is in stark contrast to financial accounting, which is the process of preparing and presenting quarterly or yearly financial information for external use, such as a company’s audited financial statements for the public.
While financial accounting is used for reporting to the external investors, shareholders and stakeholders, managerial accounting is information provided to the company’s internal managers and the business’s owners so they can plan and control the business’s activities.
Planning and Budgeting
In managerial accounting, weekly and monthly budgets are used to determine what to sell, how much of it to sell and what price should be charged in order to cover all costs laid out in the budget and make a margin. The capital budget is a good example of this.
Project Decision Making
The second concept in managerial accounting is project decision making. Managers use managerial accounting reports such as relevant costing to weigh the costs and benefits of undertaking a particular project.
Performance Measurement
Performance measurement is used to compare the actual results of operations with what was budgeted in the planning and budgeting phase. Standard costing is a good example of this technique.