Online Class: Managerial Accounting 101

Managerial Accounting: The Unseen Powerhouse of Decision-Making

In the intricate realm of accounting, while financial accounting often takes the limelight with its essential functions like audits, budgets, and financial statements, there's a quieter yet profoundly impactful player: managerial accounting.

Managerial accounting, though not as recognized as its financial counterpart, plays a pivotal role in an organization's decision-making processes. It transcends the confines of traditional number-crunching, delving into realms that aren't strictly numerical. Consider this: How do you quantify customer satisfaction, employee performance, or production efficiency? It's the managerial accountant's expertise that bridges the gap between abstract data and actionable insights.

Course Overview:

• Managerial Accounting vs. Financial Accounting: While financial accounting provides a panoramic view of an organization's economic health, managerial accounting focuses on granular analyses. For instance, while financial accounting might declare a company profitable, managerial accounting could pinpoint that one lagging department is offsetting the stellar performance of others. Think of it as a medical check-up; if financial accounting states the overall health is good, managerial accounting provides detailed bloodwork showing potential vitamin deficiencies or elevated levels.

• The Role of Managerial Accounting in Decision Making: Managerial accountants take varied data, from product rates to employee efficiency, and craft comprehensive reports, translating the intricate details into digestible information. Managers armed with these insights can chart out strategic directions, ensuring the organization remains adaptive, efficient, and relevant.

• Evolution of Managerial Accounting: Though its roots stretch back over a century, the recent past has seen a renewed interest in managerial accounting. As businesses navigate the ever-evolving landscape, the nuanced intelligence provided by this branch of accounting is being recognized as invaluable.

Course Breakdown:

• Lesson One: What Is Managerial Accounting? Dive deep into the core tenets, understanding what sets managerial accounting apart from its counterparts.

• Lesson Two: Managerial Accounting in the Organization Examine the structural role and influence of managerial accounting within diverse corporate environments.

• Lesson Three: Specifics of Managerial Accountants Explore the day-to-day operations, challenges, and opportunities faced by these professionals.

• Lesson Four: Traditional Managerial Accounting A look back at the origins, understanding foundational methodologies and their relevance today.

• Lesson Five: Looking at Policies and Company Components Unpack the interplay between managerial accounting and organizational policies, and how it aids in dissecting the company's various components for analysis.

• Lesson Six: Activity Based Costing Delve into the specifics of this costing method, understanding its significance in allocating overhead costs more accurately to products.

• Lesson Seven: Balanced Scorecard Learn about this strategic planning and management system used extensively in industry, government, and nonprofit organizations worldwide to align business activities with vision and strategy.

In conclusion, as you journey through this course, you'll unravel the multifaceted world of managerial accounting, gaining a newfound appreciation for its silent yet substantial influence on organizational success. With real-world examples, detailed explanations, and the latest data, you'll emerge well-equipped to harness the power of managerial accounting, driving your organization towards unparalleled heights. Dive in, and let's decode the secrets of this unsung hero of the corporate world.

Managerial accounting, sometimes called management accounting, is a type of accounting that is concerned with the provisions and the use of accounting information to a manager in an organization. Managerial accounts provide this service because it helps the managers make business decisions that will be better for the company based on the information provided. 

Unlike financial accounting, which is reported publicly so that shareholders and investors can determine the strength of the company, managerial accounting is not reported publicly and is confidential, used only by the management. As well, unlike financial accounting, managerial accounting tends to be more forward looking than historical. Financial accounting looks at what happened in the past year or quarter, while forward looking managerial accounting helps to make decisions based on future financial data. 

This is what makes managerial accounting so important in terms of helping managers come to decisions.

Managerial accounting has three main areas where it puts most of its focus:

 

Managerial accounting has a long history in the Western world, dating back to the early 19^th century during the time of the Industrial Revolution. It was during this period that many companies were heavily controlled by the owner-manager who borrowed money based not on credit, but on their personal relationships with others who had money.  

These companies did not have a shareholder structure, and there was little debt in these companies so there was no need to create large and complex financial reports. This is where managerial accounting came in. It was sophisticated, but easy to understand and it provided all the essential information that was needed for large scale productions such as steel and textiles.  

This new type of accounting had to be based on outside suppliers of capital that used those financial statements. Due to this new emphasis on inventory costing procedures by accountants at the turn of the century, there was a profound change in management accounting. Through the subsequent decades, management accountants would increasingly focus their efforts to ensure that the financial accounting objectives were met, and with financial reports released on time. With this shift from managerial accounting to financial accounting, managerial accounting became stagnant. Up until the 1980's, management accounting practices were pushed to the side as financial accounting methods that had been used since the days of World War One kept companies looking back rather than forward. 

During the better part of the 20^th century, while historical and financial accounting reigned supreme, there were some forward thinking companies that looked at managerial accounting as the method that would help their business the most. 

In recent years, at the beginning part of the 21^st century, new economic forces are creating changes in accounting and the practice of management accounting is gaining steam and becoming more and more prominent in organizations around the world. 

In subsequent chapters we will learn about how management accounting differs from traditional accounting, how it fits into an organization, and the various types of managerial accounting methods that exist out there.