Our study in this book prior to this chapter has centered on financial accounting. The main objective of financial accounting is to report useful information in the form of general purpose financial statements (income statement, statement of retained earnings, balance sheet, and statement of cash flows) to management and external users such as stockholders, creditors, and regulating agencies. In this chapter, we begin our study of managerial accounting. The main objective of managerial accounting is to provide reports for internal users; these reports are adapted to management's needs for information and control at the various administrative levels of an organization. Detailed reports about the internal activities and performance of the subunits of an organization are necessary for management's use in making decisions about the subunits to achieve the goals of profitability and stewardship for the entire organization over the long run. In this chapter, we will examine the functions of managerial accounting and explain cost concepts and financial statements for a manufacturer.