Managerial Accounting Managerial Accounting Is Different From

Managerial Accounting

Accounting

Managerial accounting is different from financial accounting because it is used primarily by companies and organization to generate weekly, daily and monthly reports to help them forecast future financial events (Birnberg, 1992). The profession of managerial accounting looks at the many ways managers can help facilitate increased revenues over defined times, and the future in general. It is not concerned with investments as much as it is concerned with the overall profitability of the company in which the manager works with. Managerial accounting once began as a method of simply keeping track of an organizations time and finances, much like a treasurer might. Over time however, and especially given the current global state of the economy, managerial accounting is now concerned with the profitability and future success of organizations not just domestically but also globally. The use of the internet and technology has dramatically changed the way organizations conduct business. Now organizations can invest as much as individuals can, and companies have taken note of this.

Financial accounting is used outside of organizations and businesses and used to review financials for defined periods of time, typically a fiscal period. Financial accountants can work for individuals, boards, or organizations. Typically they work with investments. Their goal is to maximize financial investments. Accountants may use this information as predictive for investors and to make important financial decisions (Birnberg, 1992). Top managers in organizations typically use managerial accounting; it is a profession that is utilized by companies to help expand the economic foundation within an organization (Birnberg, 1992). The CMA is an official certification and examination that the Institute of Management Accountant which is a professional organization designed for Accounting professionals (Birnberg, 1992). It follows certain standards, known as generally accepted accounting principles, which accountants use to help establish standard profitability, liquidity, solvency and stability standards (Bhide, 2000; Birnberg, 1992).

Part II

The primary difference between absorption and variable income statements is that absorption costing incorporates all costs associated with manufacturing; this includes the cost of direct materials, labor and both variable and fixed overhead associated with manufacturing (Bhide, 2000; Macri, 2000). Absorption income statements take into consideration full costing, so fixed overhead is a product cost until the product is sold. Variable costing online includes the variable manufacturing costs, which include direct materials, labor and the variable overhead associated with manufacturing. Thus, the entire amount of fixed costs is expenses that are incurred during the year (Macri, 2000). When one calculates the contribution margin, the variable cost of goods sold and variable selling and administrative expenses must then be subtracted from sales. Variable costing can thus be used for cost volume profit or a break even analysis (Collingwood, 2001).