Chapter 1 Management Accounting Flashcards
Purpose of Management Accounting
Planning
Co-ordinating
Controlling
Communicating
Motivating
Decision Making
Decision Making
Management accountants use management information to make informed decisions about the future
Planning
Management accountants provide information that is needed to make plans for the business
Co-ordinating
By producing plans the different departments within an organisation can be co-ordinated to work together
Controlling
Comparing actual figures with budget figures. Then using this information to look into to areas which need to be improved.
Communicating
Making sure all departments are on the same page in terms of what the plan is.
Motivating
Targets should be included within the plans to motivate the employees.
What are the attributes of good information?
Accurate
Complete
Cost Beneficial (Cheap)
Understandable
Relevant
Authoritative
Timely
Easy to use
What is Cost Accounting?
Cost accounting is used to determine the cost of a good or service, cost of a accounting period, value inventory, prepare budgets/ forecasts, determine selling price, determine profits on individual products/services.
What is a Cost Unit?
A individual unit of a product or service for which cost can be separated to. E.g a car manufacturer would use a car, a hairdresser would use a haircut.
What is a Composite Unit?
A composite unit is when a company has two variable they have to divide costs to such as tonnes-miles for a delivery company or patients-day for a hotpital
What is a Cost Centre?
Is a place where money leaves the business (costs) but no money comes into the business (incomes). This could be a factory or a classroom for example.
What are Segmented Reports?
Reports that are produced for different segments, products or services of the business
What are Budgeted Financial Reports?
Budgeted statement of profit or loss and budgets statement of financial position. (Basically budget version of reports made in financial accounting)
What are Variance Reports?
Reports comparing actual figures and budgeted figures
What are Cost Cards?
The detailed breakdown of the cost of a product/service.
What is a Cost Object?
Any objects that can ascertain a cost
What is a Responsibility Centre?
An individual part of a business whose manager has a personal responsibility on performance.
What is a Revenue Centre?
A part of a business which only occurs income not cost. Eg. A sales team
What is a Profit Centre?
A profit centre is a part of a business where both cost and incomes happen.
What is a Investment Centre?
A part of a business where investment decisions are made. Therefore they are often judged on Capital Employed as well as profits.
