The History of Management Accounting

Management accounting is an internal business function that focuses on the recording and reporting of internal financial information. This process commonly provides information for business decisions. Though it is an important business function, management accounting is not as old as financial accounting.

Origins

According to the Accounting for Management website, management accounting dates to the Industrial Revolution of the 19th century. Many companies during this time were owned by individuals rather than shareholders. Owners needed financial information particular to their operations rather than statements for external users.

Features

Management accounting information was primarily for internal use. Owners and managers relied on information about their company's production process for making decisions and measuring performance.

Growth in the business environment increased the need for financial accounting information released for external business stakeholders, according to the Accounting for Management website.

Currently

Management accounting is a common business function in today's business environment. Companies use a mixture of management and financial accounting for their financial processes. Because management accounting does not require the use of standard accounting principles, owners and managers have some latitude in preparing this information.

References

• Accounting for Management: History of Managerial Accounting