Ch. 1 Flashcards
Accounting systems are used for?
To record economic events and transactions such as sales and materials purchases and process the data into information helpful to managers etc
Processing any economic transaction means what?
Collecting, categorizing, summarizing and analyzing
Costs are collected by category such as
Materials, labor and shipping
Accounting systems also provide information found in the firms
Income statement
Balance sheet
Statement of cash flow
Performance reports
Managers use I/S, B/S, statement of cash flows and performance reports to do what?
Make decisions about the activities, businesses or functional areas they oversee
Databases
Stores information in a way that allows different managers to access the information they need
ERP system is a
Single database
That collects data
And
Feeds them into applications that support
A company’s business activities such as purchasing, production, distribution and sales
Financial accounting
Focuses on reporting financial
information to external parties
such as investors, gov agencies, banks and
supplies based on GAAP
What is the most important way for financial accounting information to affect managers decisions and actions?
Through compensation which is
often in part based on numbers in
financial statements
Management accounting
Process of measuring, analyzing
and reporting financial and non
financial information that helps managers make
decisions to fulfill the goals of an
organization
Managers use management accounting information to?
1) develop, communicate and
Implement strategies
2) coordinate product design, production and
marketing decisions and evaluate
a company performance
Which type of accounting information and reports do not have to follow a set of principles or rules?
Management accounting
What are the key questions in management accounting?
1) how will this info help managers do their jobs better?
2) do the benefits of producing this info exceed costs?
Reports are common to both management accounting and financial acct?
True or false?
True
Cost acct provides info to both what?
Management and financial
What is the process of cost accounting?
Measuring, analyzing and
reporting financial & non financial
info related to costs of acquiring or using
resources in an organization
Most accounting professionals take the perspective that cost information is a part of?
Management acct info collected
to make management decisions
Cost management
Describes the activities managers
undertake to use resources in a
way that increases a product’s value to
customers and achieves an organizations goals
Cost management is not onl about reducing costs.
True or false?
True
Costs management also includes what? To incur additional costs?
Making decisions
Information from acct systems help managers to manage costs but the info and accounting systems themselves are not ?
Cost management
A company’s strategy specifies what?
How the organization matches its
Own capabilities w/ opportunities
In the marketplace
In other words strategy describes how an organization will
Compete & the opportunities it’s managers seek and pursue
The two broad strategies are
1) cost leadership strategy –>
Provide quality product or
services at low prices and managing costs
2) product differentiation strategy –> generate
profits & growth bc they offer differentiated or
unique products or services that appeal to
customers and often priced higher than the
less popular product or services of competitors
Management accountants work closely with who to formulate what?
With managers in various departments to formulate strategies by providing info about sources of competitive advantage such as
1) company’s cost, productivity or efficiency
advantage relative to competitors
2) premium prices a company can charge
relative to the costs of adding features that
make its products or services distinctive
What is strategic cost management?
Describes cost management that specifically focuses on strategic issues
Management accounting information helps managers formulat strategy by answering the following ?’s
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What is the value chain?
Sequence of business functions by which a product is made progressively more useful to customers
Research and development (R&D)
Generating and experimenting
with ideas related to new
products , services or processes
Design of products and processes
Detailed planning, engineering &
Testing of products and processes
Production
Procuring, transporting and
storing (inbound logistics) and
coordinating and assembling (operations)
resources to produce. Product or deliver a
service
Marketing (including sales)
Promotes & sells products or
Services to customers or
prospective customers
Distribution
Processing orders & shipping
Products or services to customers
Customer service
Providing after sales service to
customers
Administration function is included within
Primary functions
Administration function includes
Accounting & finance
Human resource management
Info technology &
Supports 6 primary business functions
Each business is essential to companies satisfying who?
Their customers and keeping them satisfied and loyal over time
Customer relationship management (CRM)
A strategy that integrates people
and technology in all business
functions to deepen relations with customers,
partners & distributors
Companies gain (in terms of cost, quality, &; the speed with which new products are developed)
If 2 or more of individual business functions of value chain work concurrently as a team
Managers track the cost incurred in each. Value chain category
True or false?
True
What is the goal of managers when tracking costs incurred in each value chain category?
Reduce costs and improve efficiency
Production and distribution of the value chain is referred as the ?
Supply chain
Supply chain describes
The flow of goods, services & info
from initial sources of materials &
services to delivery of products to consumers
regardless of whether those activities occur
in 1 organization or in multiple organizations
Part of cost management emphasizes what?
Integrating & coordinating activities Across all companies in supply chain to improve their performance & reduce costs
Customers want companies to use value chain & supply chain to deliver ever improving levels of performance when it comes to several or all of the following:
1) . Cost and efficiency
2) . Quality
3) . Time
4) . Innovation
5) sustainability
1) cost and efficiency
- face continuous pressure to reduce cost of products
- to calculate & manage cost of products, must understand activities that cause costs to arise
How does management acct info help managers calculate a target cost for a product?
By subtracting from target price the operating income per unit of product that a company wants to earn
How do managers achieve target cost?
By eliminating some activities (such as rework) and reduce costs of performing activities on all value chain functions from initial R&;D to customer service
2) quality
- total quality management (TQM) is continuously improving the quality of products and processes
Managers who implement TQM believe what?
Each and every person in the value chain is responsible for delivery products and services that exceed customers expectations
Managers use management accounting information to evaluate costs and revenue benefits of TQM initiatives
True or false?
True
Using TQM, companies design products and services to meet
Customer needs and wants, to make these products with zero (or very few) defects and waste & to minimize inventories
3) Time
- two important dimensions: new product development time and customer response time
New product development time
Is the time it takes for companies to create New products and bring them to market
Customer response time
Describes the speed at which an organization responds to customer requests
To deliver a product on time what do managers need to increase?
Capacity of machine to produce more output
Management accounting info can help managers quantify
Costs and benefits of doing so
4) innovation
- constant flow of innovative products or services is basis of an ongoing success of company
Who does managers rely on to evaluate alternative investment and R&D decisions?
Management accounting information
5) Sustainability
Is the application of cost and efficiency, quality, time and innovation to promote sustainability
Which is the development & implementation of strategies to achieve long term financial, social and environmental goals
Sustainability is important
1) more & more investors care
2) companies find that sustainability goals attract and inspire employees
3) customers prefer products of companies with good sustainability records and boycot companies with poor sustainability records
4) sustainability performance of firms is monitored by societ & activist nongovernmental organizations & take action when their is a violation of environmental laws which
Who helps managers track the key success factors of their firms as well of their competitors ?
Management accountants
Competitive info serves as a benchmark managers use to what?
Continuously improve their operations
Decision making, planning and control: the five step decision making process
- Identify the problem and uncertainties
- Obtain information
- Make predictions about the future
- Make decisions by choosing among alternatives
- Implement the decision, evaluate performance and learn
Steps 1-4 of the 5 step decision making process is referred to
Planning
Planning
Consist of selecting an
organizations goals and
strategies, predicting results under various
alternative ways of achieving those goals
, deciding how to achieve desired goals and
communicating the goals and how to achieve
Ithem to the entire organization
What is the most important planning tool when implementing strategy?
Budget
Budget
Quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan
Control
Comprises taking actions that
implement the planning decisions,
evaluating past performance and providing
feedback and learning to help
future decision making
What are the 3 guidelines that help management accountants provide the most value to strategic & operational decision making of their companies
- Employ a cost benefit approach
- Five full recognition to behavioral and technical considerations
- Use different costs for different purposes
When is the cost benefit approach used?
When managers continually face
L
resource allocation decisions such
as whether to purchase a new software
package or hire a new employee
When should managers spend the resources?
If only the expected benefits to the company exceed the excepted costs
Technical considerations helps managers make?
Wise economic decisions by
providing them with the desired
info in an appropriate format and at the
preferred frequency
How do budgets have a behavioral effect?
By motivating and rewarding employees for achieving an organizations goals
Line management
Such as production, marketing,
and distribution management is
responsible for achieving goals of the
organization
Staff management
Such as a management
accountants and information
technology and human resources management
provides advice, support and assistance to line
management
CFO (Chief financial officer)
Also called finance director
Responsible for overseeing the financial operations of an organization
Controllership
Provides financial info for reports
to managers & shareholders and
oversees the overall operations of an
accounting system
Treasury
Oversees banking & short and long term financing, investments and cash management
Risk management
Manages financial risk of interest and exchange rate changes and derivatives management
Taxation
Plans income, sales and international taxes
Investor relations
Communicates with, responds to and interacts with shareholders
Strategic planning
Defying strategy and allocating resources to implement strategy
Controller (also called chief accounting officer))
Is the financial executive primarily responsible for management and financial accounting
Management accountants must work well in
Cross functional teams and as a business partner
Management accountants must raise tough questions for managers to consider especially when preparing budgets
True or false?
True
Management accountants must do the following
- Management accountants must work well in Cross functional teams and as a business partner
- Management accountants must raise tough questions for managers to consider especially when preparing budgets
- They must lead & motivate people to change and be innovative
- They must communicate clearly, openly and candidly
- They must have a strong sense of integrity
Ethics is the foundation of a well functioning
Economy
Sarbanes oxley was passed inresponse to
Series of corporate scandals
Sarbanes Oxley was s designed to
Improve internal control, corporate governance, monitoring of managers & disclosure practices of public corporations
Part of sarbanes, CEO AND CFO must do what?
Certify that the financial statement fairly represent the results of their operations
Sarbanes also authorizes PCAOB to do what?
Oversee, review and investigate the work of auditors
