1. Gather information about critical results achieved 2. Compare actual results and expected outcome - evaluate outcome 3. Revise original objectives if necessary

Chapter 1 - Accounting for management Flashcards by Burhan Pazar

What is data?

‘Data’ means facts. Data consists of numbers, letters, symbols, raw facts, events and transactions which have been recorded but not yet processed into a form suitable for use.

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What is information?

Information is data which has been processed in such a way that it is meaningful to the person who receives it (for making decisions).

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ACCURATE

Accurate 
Complete
Cost effective
Understandable 
Relevant
Accessible 
Timely
Easy to use

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What does planning involve?

establishing the objectives of an organisation and formulating relevant strategies that can be used to achieve those objectives.

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What does it help to know when making plans? And why?

it helps to know what has happened in the past so that decisions about what is achievable in the future can be made. For example, if a manager is planning future sales volumes, he needs to know what the sales volumes have been in the past.

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Can planning be long term or short term

Planning can be either shortterm (tactical planning) or longterm (strategic planning).

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What does decision making involve?

considering information that has been provided
and making an informed decision.

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What are the two parts of the decision making process?

The first part of the decisionmaking process is planning, the second part is control.

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3 parts to control

Gather information about critical results achieved
Compare actual results and expected outcome - evaluate outcome
Revise original objectives if necessary

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What is feedback?

Internallysourced information, produced largely for control purposes

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What is an organisations mission statement

a statement in writing that describes the overall aims of an organisation, that is, what it is trying to accomplish. In other words it sets out the whole purpose of the business.

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What are the 4 elements to a mission statement?

Purpose
Strategy
Policies and culture
Values

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What should aims and objectives be?

SMART

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What is SMART?

Specific
Manageable
Attainable
Relevant
Timed

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What is strategic planning also known as?

Strategic planning’ can also be known as ‘longterm planning’ or ‘corporate planning’.

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What term is strategic planning and how long?

Long term (5years plus)

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What part of the organisation does Strategic Planning consider?

The whole organisation

What does tactical planning do to strategical planning?

Tactical planning takes the strategic plan and breaks it down into manageable chunks

What term is tactical planning and how long?

short to medium term plans for the next year.

What level of management formulate strategic planning

Senior management

What level of management make tactical planning?

Senior and middle management

What area of the organisation does tactical planning consider?

individual areas of the business to enable the strategic plan to be achieved

What term is operation planning?

Day to day decision, they deal with problems as they arise

What level of management is involved with operational planning

All managers

What is responsibility accounting based on?

identifying individual parts of a business which are the responsibility of a single manager.

What is a responsibility centre?

Is an individual part of a business who’s manager has responsibility for its performance.

What are the main responsibility centres?

* cost centre * revenue centre * profit centre * investment centre.

What would the cost centre for an accounting firm be?

For an accountancy firm, the cost centres might be: audit; taxation; accountancy; word processing; administration; canteen. Alternatively, they might be the various geographical locations, e.g. the London office, the Cardiff office, the Plymouth office.

How is the performance of a cost centre manager judged?

on the extent to which cost targets have been achieved.

What information does cost centre managers need?

about costs that are incurred and charged to their cost centres.

What is revenue centre?

is a part of the organisation that earns sales revenue. It is similar to a cost centre, but only revenues, and not costs, are recorded.

What is a revenue centre generally associated with?

selling activities, for example, a regional sales managers may have responsibility for the regional sales revenues generated.

What is a profit centre

is a part of the business for which both the costs incurred | and the revenues earned are identified.

Where is profit centre often found?

in large organisations with a divisionalised structure, and each division is treated as a profit centre.

What are management of investment centres responsible for?

Managers of investment centres are responsible for investment decisions as well as decisions affecting costs and revenues.

How is performance of an investment centre measured?

It is measured in terms of the profit earned relative to the capital invested (employed). This is known as return on capital employed (ROCE)

What is the formula of ROCE

ROCE = Profit/Capital employed

What is financial accounting?

Financial accounting involves recording the financial transactions of an organisation and summarising them in periodic financial statements for external users who wish to analyse and interpret the financial position of the organisation.

What are the main duties of financial accounting?

maintaining the bookkeeping system of the nominal ledger, payables control account, receivables control account and so on and to prepare financial statements as required by law and accounting standards.

Is the information created for financial account sufficient for management accounting?

No it’s not usually sufficient