The process of preparing financial and non-financial reports for internal managers to aid in decision-making, planning, and performance control.
Management Accounting (also called Managerial Accounting) provides information specifically for internal decision-makers — unlike financial accounting which serves external stakeholders. It includes budgeting, cost analysis, variance analysis, break-even analysis, capital budgeting, and performance measurement. Management accounts are not governed by accounting standards (no Ind AS/IFRS rules), can be prepared at any frequency, include forward-looking estimates, and can use non-financial metrics (customer satisfaction, employee turnover, production efficiency).
Monthly Management Report for CEO includes: Revenue vs Budget (₹45L actual vs ₹50L budget = 10% shortfall), Gross margin by product line (Product A: 65%, Product B: 35% — consider discontinuing B), Cash runway (4.5 months at current burn rate), Customer acquisition cost trend (₹2,500 → ₹3,100 over 3 months — investigate), and Headcount vs plan (85 actual vs 90 budgeted — 5 open positions).
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Financial accounting: mandatory, follows standards (Ind AS), annual/quarterly, historical, for external stakeholders (investors, banks, tax). Management accounting: optional, no standards, any frequency, includes forecasts, for internal managers. Financial tells 'what happened'; Management tells 'why it happened and what to do next'.
Top 5: 1) Monthly P&L with budget variance, 2) Cash flow forecast (13-week rolling), 3) Product/service profitability analysis, 4) Key Performance Indicators (KPIs) dashboard, 5) Working capital report (DSO, DPO, inventory days). Frequency depends on business stage — startups need weekly; mature businesses monthly.
A branch of accounting that records, classifies, analyzes, and allocates costs to products, services, or activities to help management make informed business decisions.
A financial plan that estimates income and expenses over a specific future period, used to guide spending and resource allocation.
The process of comparing actual financial results with budgeted or standard figures to identify, quantify, and explain the differences (variances).
A financial analysis tool that examines the relationship between costs, sales volume, and profit to determine how changes in any of these affect profitability.
The point at which a business's total revenue equals total costs, resulting in neither profit nor loss.
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