The Role of Cost Management in a Business

Managerial accounting has increasingly become more than just cost accounting. In fact, nowadays managerial accounting and cost accounting are so inter-related that it is difficult to distinguish between them. However, cost accountants are more concerned with acquiring and calculating information whereas managerial accountants are more concerned with using the information calculated (Fazal, 2011). “Today, managerial accountants serve as internal business consultants, working side-by-side in cross-functional teams with managers from all areas of the organization (Hilton, 2011).”

The role of managerial accountants in a business is to pursue the organization’s goals through the processes of identifying, analyzing, interpreting and communicating information (Hilton, 2011, p.4). In pursuit of these goals, the organization acquires resources, including human capital (labor) and then engages in a set of activities (Hilton, 2011, p.4). Management activities include decision-making, directing operating activities, planning, and controlling (Hilton, 2011, p.4). When making decisions, the managerial accountant chooses the best course of action among the available alternatives. Directing activities involves running the operations of the business on a day-to-day basis. Planning is developing a detailed financial and operational strategy. Controlling is ensuring that the organization operates according to the strategy and achieves its goals (Hilton, 2011, p.6). The objectives of managerial accounting are: 1) to provide information for decision-making and planning; 2) to assist managers in directing and controlling operations; 3) to motivate managers and employees to meet the organization’s goals; 4) to measure performance against goals; and 5) to assess the organization’s competitiveness. Assessing the organization’s competitiveness also includes working with other managers to ensure long-run competitiveness in the industry. Thus, cost accountants are now taking a more pro-active role as they are involved in both strategy and day-to-day decisions (Hilton, 2011, pp.6-7).

Fazal, H. (2011). What is the difference between cost accounting and management accounting? Retrieved from   management-accounting/

Hilton, R. W.   (2011). Managerial accounting: Creating value in a dynamic business environment.   Boston, MA   McGraw-Hill/Irwin.   ISBN: 978-0078110917


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