Chapter 1 - Key terms

Question 1

Budgets

Answer 1

(p. 4): Budgets are detailed financial plans that quantify future expectations for revenue, expenses, and other financial transactions. They are essential tools for planning and controlling operations within an organization.

Question 2

Budgeting

Answer 2

(p. 4): The process of creating a budget involves allocating resources to different departments or projects within an organization, ensuring that each area operates within its financial means.

Question 3

Business process

Answer 3

(p. 12): A set of linked activities that create value by transforming inputs into outputs. In management accounting, business processes are analyzed to improve efficiency and reduce costs.

Question 4

Constraints

Answer 4

(p. 10): Factors that limit an organization’s ability to achieve its objectives. Constraints can include resource shortages, regulations, or market limitations, and identifying them is crucial for effective decision-making.

Question 5

Control

Answer 5

(p. 4): In management, control refers to the process of monitoring operations to ensure they align with the organization’s goals and objectives, making adjustments as necessary.

Question 6

Controlling

Answer 6

(p. 3): Controlling involves measuring performance, comparing it against established standards or objectives, and taking corrective action to ensure the organization stays on track.

Question 7

Corporate governance

Answer 7

(p. 13): The system by which organizations are directed and controlled, ensuring accountability, fairness, and transparency in its relationships with stakeholders.

Question 8

Decentralization

Answer 8

(p. 8): The distribution of decision-making authority throughout an organization, allowing lower-level managers to have more control over operations and resources.

Question 9

Decision making

Answer 9

(p. 3): The process of choosing among alternatives to achieve the organization’s objectives. Management accounting provides data to support informed decision-making.

Question 10

Directing and motivating

Answer 10

(p. 3): These are managerial tasks that involve guiding employees toward achieving organizational goals and providing incentives or encouragement to maintain productivity.

Question 11

Enterprise resource planning (ERP)

Answer 11

(p. 13): Integrated software systems that manage business processes across various departments, such as finance, supply chain, and human resources, providing real-time data for better decision-making.

Question 12

Environmental management accounting

Answer 12

(p. 15): The identification, collection, and analysis of environmental cost information to help organizations manage their environmental impact and comply with sustainability regulations.

Question 13

Feedback

Answer 13

(p. 4): Information provided to management regarding the results of actions taken. It helps managers monitor whether operations are on track and make adjustments when necessary.

Question 14

Financial accounting

Answer 14

(p. 3): The field of accounting concerned with providing financial information to external stakeholders, such as investors and creditors. It focuses on historical data and compliance with accounting standards.

Question 15

Just-in-time (JIT)

Answer 15

(p. 12): A production strategy that seeks to reduce in-process inventory and associated costs by producing goods only when they are needed. It helps companies reduce waste and improve efficiency.

Question 16

Line

Answer 16

(p. 9): Line positions in an organization are directly involved in the core activities of the company, such as production, sales, and services. Line managers have authority to make decisions related to their functional areas.

Question 17

Management accounting

Answer 17

(p. 3): The practice of preparing and providing accounting information for internal management use. It helps managers with planning, decision-making, and controlling operations.

Question 18

Organization chart

Answer 18

(p. 8): A diagram that visually represents the structure of an organization, showing the relationships and hierarchies between various departments, positions, and responsibilities.

Question 19

Outsourcing

Answer 19

(p. 13): The practice of contracting external suppliers or service providers to perform activities that are traditionally handled internally by the company. This is often done to reduce costs or improve efficiency.

Question 19

Performance report

Answer 19

(p. 4): A report that compares actual results to budgeted figures. It is used by management to assess the performance of departments or operations and identify areas needing improvement.

Question 20

Planning

Answer 20

(p. 3): The process of setting goals, defining strategies, and determining the resources needed to achieve organizational objectives. It is a fundamental function of management.

Question 20

Planning and control cycle

Answer 20

(p. 5): A continuous loop of activities in which management plans, executes, monitors, and adjusts operations to ensure the organization meets its goals.

Question 21

Segments

Answer 21

(p. 7): Different parts or divisions of an organization, such as product lines, departments, or geographic regions, for which financial performance is tracked separately.

Question 22

Shared service centres

Answer 22

(p. 13): Centralized units within an organization that provide administrative services (e.g., HR, finance, IT) to various departments or divisions to improve efficiency and reduce costs.

Question 23

Staff

Answer 23

(p. 9): Staff positions in an organization provide support and assistance to line managers. They do not have direct authority over production or revenue-generating activities but offer expert advice or services.

Question 24

Total quality management (TQM)

Answer 24

(p. 12): A management approach focused on continuous improvement of products and processes to ensure high quality. It involves all employees in improving operations and reducing defects.