Page 6 - Managerial Accounting-MGT 145

Module 1: Cost Measurement and Estimation

We begin by examining the differences between
financial and managerial accounting. The primary

difference pertains to the audience: who will read the
reports? Financial Accounting information is geared
toward external users, while Managerial Accounting is

for internal users.

Managerial accounting is integral to making
operational and strategic decisions.
In this unit we examine the manufacturing process and

related financial accounting transactions, so you can
differentiate between costs assigned to products and

costs assigned to a period of time.

The flow of costs in accounting mirrors the physical

flow of the inventory. For example, a pizza parlor buys
the direct materials they put on their pizzas (cheese,

tomatoes, and pepperoni). When a customer orders a
pizza, the restaurant assembles the direct materials,
bakes (work in process) and completes a pizza (finished

goods), and delivers it to the customer.