Management Accounting
Purpose-built information for planning, control and decisions
Management Accounting
Financial accounting asks what should be reported externally. Management accounting asks what information will improve a particular internal decision.
That flexibility creates responsibility:
- define the decision and time horizon;
- model only causal, relevant effects;
- reconcile internal measures to reliable source data;
- show assumptions and uncertainty;
- anticipate the behaviour a metric may encourage.
The route
| Module | Central question | Northstar output |
|---|---|---|
| 1. Cost Foundations | What causes cost and how should it be assigned? | Cost model and product-cost comparison |
| 2. Planning and Control | What should happen, what did happen and why? | CVP scenario, flexible budget and KPI diagnosis |
| 3. Decisions and Investment | Which alternative creates the best risk-adjusted outcome? | Incremental decision and NPV model |
One number can serve different purposes
Northstar’s fixed factory overhead may be:
- inventoriable production cost for external reporting;
- fixed period cost in a variable-costing contribution report;
- unavoidable and irrelevant to a one-off special order;
- avoidable and relevant to a factory-closure decision;
- part of a capacity-resource model for long-run pricing.
The cost did not change identity. The decision, horizon and avoidability changed.
Standard answer structure
- Define the decision.
- State capacity and time horizon.
- Identify cash flows or resources that differ.
- Calculate a base case.
- test operational, behavioural and risk constraints.
- recommend and state the trigger for reconsideration.