As per guidelines and recommendation of CIMA (Chartered Institute of Management Accountants), Managerial accounting can be defined as the ‘Process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Managerial accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities’.

Managerial accounting is similar to ‘Cost accounting’. There is another terminology- ‘Financial accounting’ in the corporate world. The key difference between these two is ‘Managerial accounting’ is the tool of the business owners and his managerial along with secretarial staffs, who are to make decisions ‘in house’; whereas ‘Financial accounting’ is aimed to provide detailed reports about to the outsider who is interested in a company.

The pillars of ‘Managerial accounting’ are detailed information regarding the costs of a company’s products and the services they offer, budgets- which can be defined as quantitative report of their ongoing and future plans, performance reports of previous years which includes the divergence from their proposed plans and the other information which can be helpful to make right decisions for the manager towards the precise direction. All these are directed to improve a company’s cost-benefit ratio and to reduce unnecessary expenditure. ‘Managerial accounting’ also suggests about most advantageous use of resources besides protection of the company’s assets.

During the 9th decade of the last century, accountants were greatly condemned regarding the prevailing management accounting performance as the system was not foolproof. It was there for last 60 years or so and the world had changed a lot since the development of the system. The newer concept of ‘Full cost analysis’ was developed with the help of ‘life cycle cost analysis’ and ‘activity-based costing’.