All organizations have goals, and their managers need information as they strive to attain those goals. Information is needed for the management functions of decision making, planning, directing operations, and controlling. Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information in pursuit of an organization’s goals. Managerial accounting is an integral part of the management process, and managerial accountants are important strategic partners in an organization’s management team.

Managerial accounting is an important part of any organization’s management information system. The five objectives of managerial accounting activity are (1) providing information for decision making and planning, and proactively participating as part of the management team in the decision-making and planning processes; (2) assisting managers in directing and controlling operations; (3) motivating managers and other employees toward the organization’s goals; (4) measuring the performance of activities, subunits, managers, and other employees within the organization; and (5) assessing the organization’s competitive position and working with other managers to ensure the organization’s long-run competitiveness in its industry.

Managerial accounting differs from financial accounting in several ways. The users of managerial accounting information are managers inside the organization. Managerial accounting information is not mandatory, is unregulated, and draws on data from the basic accounting system as well as other data sources. The users of financial accounting information are interested parties outside the organization, such as investors and creditors. Financial accounting information is required for publicly held companies, is regulated by the Financial Accounting Standards Board, and is based almost entirely on historical transaction data.

In a formal organization chart, managerial accountants are in a staff capacity. However, managerial accountants are increasingly being deployed as members of cross-functional teams, which address a variety of managerial decisions and business issues. More than ever before, managerial accountants are physically located throughout an enterprise alongside the managers with whom they work closely.

Managerial accounting continually evolves and adapts as the business environment changes. The growth of international competition and dramatic changes in technology are placing ever-greater demands on the information provided by managerial accounting systems. Many organizations have moved away from a historical cost accounting perspective and toward a proactive cost management perspective. Under this approach, the managerial accountant is part of a cross-functional management team that seeks to create value for the organization by managing resources, activities, and people to achieve the organization’s goals.

An organization’s value chain is the set of linked, value-creating activities, ranging from securing basic raw materials and energy to the ultimate delivery of products and services. Understanding the value chain is a crucial step in the development of an organization’s strategy. The overall recognition of the importance of cost relationships among the activities in the value chain, and the process of managing those cost relationships to the organization’s advantage, is called strategic cost management.

Managerial accounting is a profession with a certification process and a code of ethical standards. Managerial accountants are highly trained professionals, who can contribute significantly to the success of any enterprise.