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Management accounting is the process of creating accurate and timely reports for managers. Managers use the reports to make decisions. There are many theories and accepted practices in management accounting for developing reports. Ultimately, management accounting uses the “whatever works” method to create reports. Any report that provides the best possible information to solve a problem is a good one.

Management accounting is an internal reporting process. The information you create isn’t shared with the outside world. So you can put together any type of report that’s helpful to you.

As an accountant, you may be in a situation in which management asks you to create lots of reports but doesn’t use them all. Ask management how a report you’re asked to create will be used. The manager might conclude that the report really isn’t necessary — which saves you time and energy.

Financial accounting looks backward. You report on past events. Management accounting is forward-looking. It’s prospective. You’re using the reports to make decisions about the future. For example, a decision whether to manufacture a product component or buy it from someone else is a typical management decision based on management accounting.

Every manager has a preferred set of management reports, the ones they consider the most useful. I had a conversation with the retired chief financial officer (CFO) of a worldwide defense contractor. Engineers, including all senior management, dominated the company. The former CFO told me that he was successful because he figured out which financial management reports the engineers wanted. In fact, that set of reports was standardized and used in every senior management meeting.