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Lesson 1: Course Orientation and Defining Managerial Accounting
Managerial Accounting Defined
Managerial accounting is a type of accounting typically only seen and used by those who work within a company. It is also typically forward looking and relies heavily on estimates. Employees use managerial accounting for a number of different reasons, but all fall into one of three categories:
- Planning
- Controlling
- Decision Making
Navigate through the slides below to see how managerial accounting is used during the planning, controlling, and decision making processes.
Planning
The planning aspect of managerial accounting is the process of setting objectives or desired outcomes for a particular period (such as a month, a quarter, a year, or even longer). This can come in the form of setting sales goals, identifying potential cost saving techniques to be implemented, or anything in between that helps a company maximize profit.
Controlling
Controlling is the process of ensuring that the ideas produced in the planning stage have been or are being implemented, and that they are effective. Controlling can be both financial and nonfinancial. Obvious financial controlling is ensuring sales are rising or costs are being reduced. Nonfinancial objectives can be things like lack of machine or employee downtime, increases in company morale; the list is endless.
Decision Making
Decision making is the process of choosing between two or more alternatives. This process cannot be done without planning or controlling, and the opposite can be said as well. The decision-making process can only be done after planning and controlling efforts have been made. If these processes are not done, managers do not have the information necessary to make the best decisions. Alternatively, managers must make choices (decision making) just to implement any planning ideas.