Chapter 1: Costing Flashcards
What is Costing
Any system for assigning costs to any element of a business
What are 5 areas of a business for costing
Customer Groups, Departments, Processes, Products, Services, Facilities, Geographical Locations, Projects
Who uses this costing information
Management can use this for decision making purposes but these costing systems can also be the core of financial reports e.g. inventories, Variable costs.
What is the purpose of costing
- To Record Costs
- To Control Costs
- To price products
- To Value Inventory
- To aid decision making
Describe a management accountant
Concerned with the use of accounting information within the business and using this for reporting. This information is then used to provide management with the basis on which to make informed business decisions. There focus is on improving future performance.
Describe a financial accountant
Often external to a company, Focused on financial transactions and much more transactional job in general. Ultimately this job is focusing on summarising the financial statements that will be published. They ensure compliance with financial and accountancy regulations.
Describe a cost accountant
A sub category of management accounting. Specifically on the recording, classification and interpretation of costs for each product, process or job with a business. Providing data for management accountants to base their analysis on and helps facilitate improved cost control.
What are the three key processes management are involved in?
Planning, Decision Making and Control
What is a tactical plan and what is a strategic plan?
- A tactical plan is usually a forward looking plan for the next 12 months (Short - Term).
- A strategic plan is a forward looking plan for beyond 12 months (Medium/Long - Term)
What is the CIMA definition of management accounting
The application of the principles of accounting and financial management to create, protect, preserve and increase value for the stakeholders of for-profit and not-for-profit enterprises in the public and private sectors.
What is the planning process
The planning process is setting the direction and objectives of the business whether this is a tactical or strategic plan (Short term / Long term). During this phase the business will use a mission statements to help set goals.
What is the decision making process
This process is about selecting the best path forwards to realise the objectives from the planning stage, using relevant and reliable information to support the process.
What is the control process
this process is centred around using regular feedback to compare the expected results to the actual outcome. This allows management to reassess there plans and make changes to improve if neccessary.
What are the 6 responsibilities within strategic control
- Strategic Planning
- Risk assessment and management
- Setting performance measures for the company as a whole
- Codes of conduct
- Procedures for board meetings
- Establishing and reviewing the organisational structure
What are the 5 responsibilities within tactical control
- Staff management
- Applying central policies and standard procedures
- Budgets and variances
- Setting business plans for the division
- Supervising divisions and departments
