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Management Accounting > 1. Accounting for Management (p1) > Flashcards

1. Accounting for Management (p1) Flashcards

1
Q

What is management/cost accounting?

A
  • Management accounting has cost accounting as foundation
  • System for recording data and producing info about costs of products produced by an organisation
  • Establish costs for particular activities or responsibility centres
  • Provide info about performance and potential future direction.
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2
Q

What is financial accounting?

A
  • Recording financial transactions and summarising in periodic statements
  • For external users to analyse the organisations financial position
  • Maintains the bookkeeping system of the nominal ledger, payables&receivables control accounts etc
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3
Q

Differences between management and financial accounting:

A

For:
- M Internal use (managers, employees)
- F External use (shareholders, payables, lenders, banks, government)
Purpose
- M Aids planning, controlling and decision making
- F Record financial performance within and at the end of a period
Format
- M Management decide on what’s required and how to present it
- F Should adhere to accounting standards, law, and give a true and fair view
Nature of info
- M Financial and non-financial
- F Mostly financial
Time period
- M Historical and forward looking
- F Mainly historical

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4
Q

What is data?

A

Consists of:
- Numbers
- Letters
- Symbols
- Raw facts
- Events
- Transactions
that have been recorded but not processed into a form suitable for use

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5
Q

What is information?

A

Data that’s been processed to be meaningful to the receiver.

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6
Q

What are the attributes of good information?

A

ACCURATE
- Accurate
- Complete
- Cost-effective
- Understandable
- Relevant
- Authoritative
- Timely
- Easy to use

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7
Q

What are the key elements of a mission statement?

A
  • Purpose (why it exists and what for)
  • Strategy (what it provides and how)
  • Policies and culture (how it expects staff to behave)
  • Values (it’s core principles)
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8
Q

Give some characteristics of a mission statement:

A
  • Brief (no more than a page)
  • General statement of entity culture
  • States aims of the organisation
  • States business areas it intends to operate
  • Open-ended (not quantifiable)
  • Doesn’t include commercial terms (eh profit)
  • Not time-assigned
  • Forms basis of communication to people in, and outside the organisation
  • Used to formulate goals, objectives and short term targets
  • Guides direction of the entity’s strategy
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9
Q

What are the three main functions that management are involved in?

A
  • Planning
  • Decision making
  • Control
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10
Q

Describe managements planning function.

A
  • Set objectives for achievement
  • Identify how objectives can be achieved
  • Decide how objectives will be achieved
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11
Q

What is the decision making function of management?

A

To implement the decision made in planning.

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12
Q

What is the control function of management?

A
  • Gather info about results achieved
  • Compare results to expected results and evaluate outcome
  • Revise original objectives if necessary
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13
Q

What is another name for short-term planning?

A

Tactical planning

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14
Q

What is tactical planning?

A

Short-term planning

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15
Q

What is another name for long-term planning?

A

Strategic planning

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16
Q

What is strategic planning?

A

Long-term planning

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17
Q

What acronym is used to describe effective aims and objectives?

A

SMART

18
Q

When are the business’s and employee’s aims and objectives produced?

A

During planning

19
Q

What does SMART stand for?

A
  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Timed
20
Q

What does it mean to have specific objectives?

A

Well defined and understandable

21
Q

What does it mean to have measurable objectives?

A

Can completion be confirmed, and to what degree they have been achieved?

22
Q

What does it mean to have attainable objectives?

A

They can be achieved with the resources and skills available.

23
Q

What does it mean to have relevant objectives?

A

They are relevant to the people involved and the mission of the business.

24
Q

What does it mean to have timed objectives?

A

There are deadlines and stage reviews planned to monitor progress.

25
Q

What is goal congruence?

A

Where the goals of individuals, departments or levels within a business are aligned toward a larger common goal.

26
Q

What does the SMART acronym help with?

A

Creating goal congruence throughout the whole business.

27
Q

What are the three levels of planning also known as?

A

Planning horizons

28
Q

What are the three planning horizons?

A
  • Strategic
  • Tactical
  • Operational
29
Q

What is the strategic planning horizon?

A
  • Aka long-term or corporate planning
  • Considers the longer term (5yrs+)
  • Considers the whole organization
  • Senior managers
  • Aim to achieve company’s mission
30
Q

What is the tactical planning horizon?

A
  • Breaks strategic plan into manageable chunks
  • Shorter term (1 year)
  • Individual areas of the business
  • Senior and middle managers
31
Q

What is the operational planning horizon?

A
  • Day to day decisions
  • Dealing with problems as they arise
  • All managers
32
Q

What are the two steps of the decision making process?

A
  • Planning
  • Control
33
Q

What is feedback?

A

Internally sourced info produced largely for control purposes

34
Q

What is an Executive Information System?

A
  • Gives senior executives access to internal and external info
  • Provided in summarized form
  • Option to ‘drill down’ to greater level of activity
35
Q

What is a Decision Support System?

A
  • Aids making decisions
  • Predicts consequences of scenarios
  • Manager then uses their judgement to make final decision
36
Q

What is a Transaction Processing System?

A
  • Processes routine business transactions
  • Deals in large volumes
  • Eg sales and purchase info
37
Q

Give two examples of strategic information:

A
  • Profitability of main business segments
  • Prospects for present and potential markets
38
Q

Give three examples of tactical information:

A
  • Sales analysis
  • Stock levels
  • Productivity measures
39
Q

Give three examples of operational information:

A
  • Debtors and creditors
  • Payroll details
  • Raw materials requirements and usage
40
Q

How can management accounting contribute to an organization’s management information system?

A
  • Annual statutory accounts
  • Budgets and forecasts
  • Productivity Profitability reports
  • Cash flow reports
  • Investment appraisal reports
  • Standard cost and variance analysis reports
  • Returns to government departments (eg sales tax returns)
41
Q

Where may management accounting fail to assist management in the decision making process?

A

Failure to comply with qualities of useful information
- Inaccuracies (overestimating costs, overestimating sale price)
- Untimely
- Difficult to understand

Failing to provide relevant costs and revenues
- Sunk costs (future costs are more relevant to decisions)
- Incremental (the extra cost or revenue that is created as a result of the decision) this is useful
- Cash flow (actual cash spent/received. Not monetary items produced via accounting convention, eg depreciation charges)

Non-financial information is also important
- Qualitative
- Behavioural
- Motivational
- Environmental

Management Accounting (18 decks)

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