Managerial accounting assists managers in carrying out their responsibilities, which include planning, directing and motivating, and controlling.

Since managerial accounting is geared to the needs of managers rather than to the needs of outsiders, it differs substantially from financial accounting. Managerial accounting is oriented more toward the future, places less emphasis on precision, emphasizes segments of an organization (rather than the organization as a whole), is not governed by generally accepted accounting principles, and is not mandatory.

Most organizations are decentralized to some degree. The organization chart depicts who works for whom in the organization and which units perform staff functions rather than line functions. Accountants perform a staff function—they support and provide assistance to others inside the organization.

The business environment in recent years has been characterized by increasing competition and a relentless drive for continuous improvement. Several approaches have been developed to assist organizations in meeting these challenges—including Just-In-Time (JIT), Total Quality Management (TQM), Process Reengineering, and the Theory of Constraints (TOC).

JIT emphasizes the importance of reducing inventories to the barest minimum possible. This reduces working capital requirements, frees up space, reduces throughput time, reduces defects, and eliminates waste.

TQM involves focusing on the customer, and it employs systematic problem solving using teams made up of front-line workers. By emphasizing teamwork, a focus on the customer, and facts, TQM can avoid the organizational infighting that might otherwise block improvement.

Process Reengineering involves completely redesigning a business process in order to eliminate non-value-added activities and to reduce opportunities for errors. Process Reengineering relies more on outside specialists than TQM and is more likely to be imposed by top management.

The Theory of Constraints emphasizes the importance of managing the organization’s constraints. Since the constraint is whatever is holding back the organization, improvement efforts usually must be focused on the constraint in order to be really effective.

Ethical standards serve a very important practical function in an advanced market economy. Without widespread adherence to ethical standards, material living standards would fall. Ethics are the lubrication that keep a market economy functioning smoothly. The Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management provide sound, practical guidelines for resolving ethical problems that might arise in an organization.