The Pros And Cons Of Managerial Accounting

Managerial accounting, also known as cost accounting, is defined by the textbook as the phase of accounting that is related to providing information to managers for use within the organization (Noreen, Brewer, & Garrison, 2014, p. 19). Managerial accounting information is aimed at helping managers within the organization make sound business decisions. On the other hand, financial accounting is focused on providing information to individuals outside the organization. Managers rely on cost accounting to provide them with an idea of the actual expenses related to processes, departments, operations or products which are the basis of their budget procedures. This information allows them to analyze variations to determine the best method of

Variance analysis is a vital part of cost accounting because it breaks down each variance into many different elements of standard and actual costs. Some of these components are material expenses variation, volume variation and labor expenses variation (Luft, 1997, p. 215). Understanding why these fluctuations occurred when compared to what was actually planned helps a manager to save their company money by taking actions that are appropriate to correct that variation in the

Accounting ethics also ensures that each employee can be trusted with sensitive business information. Ethical standards require that information is reported in full and without bias regardless of the positive or negative effects of the information. Additionally, managerial accountants have access to confidential business information. Accountants who reveal or use internal information for their personal benefit can break trust and set the business up for serious legal implications (Luft, 1997, p. 216). Accounting ethics should be enforced to ensure that all accountants can be trusted with sensitive business and personal