Management Accounting

Written by True Tamplin, BSc, CEPF®

Updated on July 22, 2022

Management Accounting: Definition

Management accounting is concerned with preparing and presenting accounting information in such a way as to assist a firm’s management in designing policies, planning, and controlling the operations of the undertaking.

Management Accounting: Explanation

Management accounting uses both financial and cost information to advise managers in planning and controlling the organization. It provides information to persons inside the organization.

Management accountants produce dedicated reports to serve the needs of decision-makers. Past and current activities are reported to the extent that such information helps management to plan for the future.

Functions of Management

The functions of management are stated below:

  • Laying down and classifying organizational objectives
  • Defining policies to be pursued for achieving the objectives
  • Prescribing strategies to be followed
  • Planning business operations while keeping in view the company's objectives, policies, and strategy
  • Coordination of all activities so as to avoid bottlenecks (e.g., machinery and equipment in the various production departments should be well balanced)
  • Execution of production, sales, and other important functions, thereby ensuring that organizational objectives are achieved
  • Control over actual performance
    • This control is achieved by comparing actual performance with plans, measuring deviations, identifying the causes of variances, and taking suitable corrective actions to eliminate weaknesses
    • Daily, weekly, or monthly control is also achieved by issuing suitable instructions and guiding subordinates in all matters necessitating such approaches
  • Revision of plans, policies, and strategies if the situation so warrants
  • Long-term planning (e.g., for the next five years), ensuring that executives are well aware of the long-term directions of the business activities

Management Accounting FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.