Management accounting involves planning, executing, and monitoring a company’s financial activities to ensure profitability and goal achievement. In an increasingly competitive market, efficient resource use and financial control are essential. Budgeting and standard costing are among the most important tools in modern business management.

Budgeting involves creating financial plans, typically in the form of income budgets, cash flow budgets, and balance sheet budgets. These budgets serve as management tools, providing reference points for evaluating actual performance against expectations.

Standard costing means setting a predetermined cost for a product or service, based on expected quantities and prices. By comparing standard costs to actual costs, a business can identify variances and implement measures to improve efficiency. Variance analysis is therefore key to understanding cost changes, whether due to price, quantity, or productivity factors.

Activity-Based Costing (ABC) has increasingly been adopted as an alternative or supplement to standard costing. ABC allocates costs more accurately by linking them to the activities that drive them, such as the number of orders or machine hours.

Thus, management accounting is not merely administrative control—it is a strategic tool for effective operations and targeted development.

Subject description 6002

Cost and Management Accounting

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