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CIMA BA2 : Fundamentals of management accounting > Chapter 1: Intro to management accounting > Flashcards

Chapter 1: Intro to management accounting Flashcards

1
Q

How do CIMA define management accounting?

A

“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.”

Lehman terms: management accounting is about producing financial information that helps managers make decisions.

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2
Q

What are CIMA’s five fundamental ethical principles

code of ethics

A
  1. Integrity
  2. Objectivity
  3. Professional competence and due care
  4. Professional behaviour
  5. Confidentiality - disclosure is exception to maintaining confidentiality (eg. legal case)
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3
Q

Explain what is meant by Integrity as part of CIMA’s ethical principles?

A
  • Being straight forward and honest in all professional/business relationships
  • An accountant should not be associated with info that is incorrect/misleading
  • Acting consistently
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4
Q

Explain what is meant by OBJECTIVITY as part of CIMA’s ethical principles?

A
  • Being unbiased
  • Acting in an impartial manner
  • No conflict of interest (i.e. do not accept expensive gifts etc)
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5
Q

Explain what is meant by PROFESSIONAL COMPETENCE AND DUE CARE as part of CIMA’s ethical principles?

A
  • Maintaining knowledge, skills and technical standards (via CPD)
  • keeping up to date with developments
  • disclosing competency gaps and rectifying it by taking on additional training
  • doing work carefully/diligently
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6
Q

Explain what is meant by PROFESSIONAL BEHAVIOUR as part of CIMA’s ethical principles?

A
  • avoiding actions that discredit the profession
  • complying with relevant laws and regulations
  • be honest and truthful (do not make exaggerated claims about reported figures or their own skills)
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7
Q

Explain what is meant by CONFIDENTIALITY as part of CIMA’s ethical principles?

A
  • Not disclosing unauthorised info
  • Not using any info for personal advantage/gain
  • Continues after the business relationship has ended
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8
Q

What are some circumstances where confidentially can be breached?

A
  • Idea of Disclosure

- There is a legal or professional right or duty to disclose

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9
Q

CIMA’s code of conduct lists the particular circumstances in which confidential information could be disclosed.

What are these?

A
  • Where disclosure is required by law, such as in a case of legal infringement.
  • Where disclosure is permitted by law, such as during a legal investigation where one is protecting one’s professional interests.
  • Where disclosure is authorised by a client or employer.
  • Where disclosure is professionally permissible.
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10
Q

What are the 5 categories of common threats to ethical principles as per CIMA’s ethical code?

A
  1. Self interest threats - when there is financial interests/incentives
  2. Self review threats - not disclosing an error when asked to review past judgement/performance
  3. Familiarity threats - when you are so sympathetic to the interests of someone that your professional judgement is compromised.
  4. Intimidation threats - actual or perceived - you could be threatened with dismissal/replacement if you do not follow a particular unethical procedure.
  5. Advocacy threats- eg. you are a member of of an animal rights group, thus are overly critical when doing the accounts for a company who are known to conduct animal testing. Your advocacy of animal rights would affect you ability to be impartial.
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11
Q

What are some ways that organisations provide safeguards to protect employees from the threats to ethical principles?

A
  • Have ethical and conduct programs - give guidance and advise on ethical issues
  • Regulation of the profession - comprehensive regulation and guidelines and present consequences of not acting ethically
  • Careful recruitment
  • Disciplinary procedures – communicate clearly the consequences of unethical behaviour clear
  • Staff performance procedures – make sure staff are performing adequately by reviewing any issues with regard to personal conduct .
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12
Q

What should be done (by the professional accountant) in the case where it is not possible to reduce the threat to an acceptable level?

A
  • refuse to be or remain associated with information the professional accountant determines is misleading.
  • may consider getting legal advice or resignation
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13
Q

What dos a management accountant do vs. a financial accountant?

A

Management accounting - use of accounting information within organisations. this info is then used to provide management with the basis to make informed decisions

Financial accountancy - focused on the recording of financial transactions and ultimately producing a P&L, Balance sheet fo representation in the financial statement, so that shareholders and other interested parties can understand the financial performance of the business

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14
Q

Difference between management vs financial accountant - area: FOCUS

A

Management - primarily forward-looking, supporting further decisions (predicts profitability of a new range of product)

Financial - Historical (recording past transactions)

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15
Q

Difference between management vs financial accountant - area: Basis

A

Management - looks at info with a degree of prediction and estimation about the future

Financial - purely factual and based on past events

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16
Q

Difference between management vs financial accountant - area: Demographic

A

Management - intended for use by managers within the organisation to make decisions in business

Financial - intended for use by shareholders, creditors, and public figures to review companies past performance

17
Q

Difference between management vs financial accountant - area: Availability

A

Management - usually confidential and used by management

Financial - publicly reported

18
Q

Difference between management vs financial accountant - area: Construction

A

Management - reports and info often assembled subjectively to the users/business needs

Financial - according to general and accounting standards

19
Q

What are the 4 Global management accounting principles?

A

‘CITI’

  1. Communication
  2. Information
  3. Trust
  4. Impact
20
Q

What is COMMUNICATION in the context of global management accounting principles?

A

Communication:

communicate with all relevant parties throughout the decision making process, as good communication helps facilitate better integration between departments

And, the complexity of the information provided should be tailored to the users of the information

21
Q

What is INFORMATION in the context of global management accounting principles?

A

Information:

Ties in directly with communication - info provided needs to be communicated in a clear way hence:

  • The info provided should be CLEAR, RELIABLE and CONCISE
  • The info provided must be ACCURATE and PROTECTED (to avoid the risk of corruption and loss)
22
Q

What is IMPACT in the context of global management accounting principles?

A

Impact:

Impact on value must be analysed - will allow the MA to determine whether a certain decision will potentially generate, preserve, or destroy value within the business.

  • the MA must obviously utilise the relevant information.
  • In order to fully understand the impact of a potential decision on the business, the MA needs to understand the business model and the general economic environment.
23
Q

What is TRUST in the context of global management accounting principles?

A

Trust:

The management accountant must actively manage relationships and resources, so that the financial and non-financial assets, reputation and value of the business are protected.

And, trust is built by the management accountant being answerable to their direct customers and other stakeholders about the decisions they are involved in taking

24
Q

What are 3 key positions that management accountants occupy within an organisation?

A
  • Dedicated business partner -integral role as an advisor
  • shared service centre
  • Business process outsourcing (BPO) -contracting out of all or part of a business operation to an external organisation.
25
Q

What are characteristics of good information?

A

Good info should be:

Accurate
Complete
Cost beneficial
Understandable
Relevant
Accessible
Timely
Easy to use

CIMA BA2 : Fundamentals of management accounting (1 decks)

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