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ACCT323 > Chapter 1: Managerial Accounting Introduction > Flashcards

Chapter 1: Managerial Accounting Introduction Flashcards

1
Q

Managerial accounting

A

provides economic and financial info for managers and other internal users

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2
Q

Managerial vs Financial Acct

A

SIMILARITIES:
-> Economic events in both

DIFFERENCES:
-> What you do with economic events

E.G.: Determining unit cost (Managerial), Reporting unit cost (Financial)

MANAGERIAL: FOCUSES ON THE PRESENT/FUTURE
FINANCIAL: FOCUSES ON THE PAST

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3
Q

3 Management Functions

A
  1. Planning: Determining objectives that add value to the business
  2. Directing & Motivating: Coordinating company activities to produce operation [They do most of this on their own]
  3. Controlling: ensuring company stays on track
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4
Q

Differences in Financial & Mgmt Acct
-> Primary Users of Reports
-> Types & Frequency of Reports
-> Purpose of Reports
-> Content of Reports
-> Verification Process

A

Financial:
-> External users (sh, creds, regs)
-> FS issued quarterly/annually
-> General Purpose
-> Pertains to business as a whole, cindensed, doubly entry accounting, GAAP
-> Audited by CPA

Managerial:
-> Internal users (officers, managers)
-> As frequently as needed
-> Specific purpose for specific decisions
-> Often about subunits of business, VERY detailed, standards vary
-> NO AUDITS

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5
Q

Organizational Structure

A

Shareholders ELECT board of directors HIRES CEO HIRES employees

2 types of employees:
-> Line Position: Directly involved iwth company’s primary revenue generation (VP’S)
-> Staff Position: Support Line Position (FNCE, HR, LEGAL, etc)

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6
Q

CFO, Treasurer, Controller

A

CFO does accounting and finance (Line Position)

Supported by Staff Positions (Treasurer) (Controller)

Controller: maintains acct records, adequate system of internal control, makes FS

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7
Q

What does internal audit staff (Staff positions) do?

A

Ensure internal control systems are functioning properly to protect assets

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8
Q

business ethics: what is Sarbanes Oxley

A

help prevent lapses in internal control (response to corp scandals)

RESULT: clarify top management responsibility for the company’s financial statements; companies now pay attention to Board of Directors & audit committee must be independant; increased penalties for misconduct

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9
Q

Manufacturing Costs

A

Processes converting raw materials into finsihed goods

Direct Materials, Direct Labor, Manufacturing Overhead

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10
Q

Direct Materials

A

Raw Materials acquisition

Indirect Materials: do not physically become part of the finished product OR are impractical to trace to finished product because they are too small in terms of cost [These become part of manufacturing overhead]

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11
Q

Direct Labor

A

The work of factory employees that is physically and directly associated with converting raw materials into finished goods is Direct Labor

Indirect Labor: Manufacturing Overhead [Work of employees that has no physical association with finished product (e.g. factory time keepers/supervisors/maintenance)]

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12
Q

Manufacturing Overhead

A

Costs indirectly associated with manufacture of finished product (e.g. indirect materials, indirect labor, depreciation, insurance, taxes, etc)

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13
Q

Direct Labor < Manufacturing overhead < Direct Materials

A

THIS IS THE COST DISTRIBUTION GENERALLY

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14
Q

Product costs

A

Direct Materials
Direct Labor
Manufacturing Overhead

Costs that do not become expenses until the company sells the finished goods inveentory (These become COGS)\ also called Inventoriable costs

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15
Q

Period Costs

A

Costs that are matched with the revenue of a specific time period rather than included as part of the cost of a product (non manufacturing costs)

When calc NI, companies deduct Period Costs from revenues

TWO TYPES: Selling expenses & Admin expenses

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16
Q

Period Costs + Product Costs = ?

A

All Costs

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17
Q

Merchandiser vs Manufacturer

A

Stores items, vs makes items

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18
Q

Merchandiser COGS in Income Statement

A

Beginning Inventory + COG purchased - Ending Merchandise Inventory = COGS

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19
Q

Manufacturer COGS Income Statement

A

Beginning Finished goods inventory + COG manufactured - ending finished goods inventory = COGS

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20
Q

So do manufacturers show calculations of COGmanufactured in Income Statement?

A

No only the final numbers, a COG manufactured schedule shows the details

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21
Q

How to determine COG Manufactured?

A

Begin Work in Process Inventory + Total Manufacturing Costs = Total Cost of Work in Process

Total Cost of Work in process - Ending Work in Process Inventory = COG manufactured

22
Q

COGmanufactured Schedule

A

Illustration 1-7

23
Q

Balance Sheet for Merchandiser

A

1 category: Inventory

24
Q

Balance Sheet for Manufacturer

A

Raw Materials Inv, WiP inv, Finished Goods Inv

25
Q

Value Chain

A

Refers to all business processes associated with providing a product or service

26
Q

Lean Manufacturing

A

Reviews all business processes in an efort to increase productivity and eliminate waste

27
Q

JIT inventory

A

Lowered inventory levels & costs for many

GOODS ARE MANUFACTURED OR PURCHASED JUST IN TIME FOR SALE

increased emphasis on product quality, the companies dont have excess inventory on hand they cant afford to stop production because of defects

28
Q

TQM

A

total quality management

reduces defects in finished products

29
Q

ABC

A

Activity based costing

allocates overhead based on each products use of particular activities in making the product

30
Q

Role of managerial accounting

A

to assist manager make relevant deciisons

31
Q

mgmt functions PLANNING

A

Looking ahead!!1

you have to establish objective and ADD value to the business!! (increase the share price)

32
Q

Directing

A

Cooridante diverse activities and HR

implement planned objectives

Provide incrntives to motive employes

hire and train

33
Q

CONTROLLING

A

Keep activities on track! determine whether goals are met

decide on the changes needed to get back on track

usually about evaluating the system

34
Q

GOOD DECISION MAKING IS THE OUTCOME OF GOOD JUDGEMENT IN PLANNING DIRECTING AND CONTROLLING

A
35
Q

CEO

A

highest position or office in an org

-> makes corp strat decisions
-> manages operations and resources
-> main POC between Borad of Directors/Shareholders and corporate operaitons

FACE OF COMPANY

36
Q

CFO

A

Responsible for all accounting and finance concerns

SUPPORTED BY:
-> controller: responsible for acct records and internal control system and preparing all financial reports
-> Treasurer: cash position, manages cash flows and short term investments

37
Q

Result is a greater emphasis on the importance of ethical
behavior in organizations and the role of the management
accountant in effecting this.

A
38
Q

Financial accounting information is geared towards external
users; hence stricter accounting and reporting principles and
standards
o Sarbanes-Oxley Act of 2002 (SOX)
o IFRS; ASPE

A
39
Q

Managerial accounting information is geared strictly for internal
users; ethical standards and practices are just as important
o CPA Canada: CPA Code of Conduct
Ethical conduct in its highest sense, however, is a product of personal
character — an acknowledgement by the individual that the standard to
be observed goes beyond that of simply conforming to the letter of a list
of prohibitions
https:/media.cpaontario.ca/stewardship-of-the-profession/pdfs/CPA-On
tario-Code-of-professional-conduct.pdf
)

A
40
Q

Managerial Accounting Today: Service
Industry Trends

A
  • In general the North American economy has shifted
    towards more service industries
    o Trend is expected to continue in the future
  • New operating controls have been designed to improve
    the quality and efficiency of specific services
  • Many of the techniques developed for manufacturing
    firms have been applied to service companies
41
Q

Managerial Accounting Today: Value Chain

A

Value Chain: All activities associated with providing a
product or service, that add value to the product or
service.
An example of a manufacturing firm value chain

42
Q

Managerial Accounting Today: Technological
Change

A

o Enterprise resource planning (ERP)
o Software systems that manage the value chain
o In large companies, an ERP system might replace as many as
200 individual software packages
* Computer-integrated manufacturing (CIM)
o Makes products untouched by human hands
* Business-to-business (B2B) e-commerce via internet

43
Q

Managerial Accounting Today: JIT

A

Just-In-Time (JIT) Inventory Methods
o Inventory system where goods are manufactured or
purchased just in time for use
o Advantage is reduced inventory cost
o Requires close relationship with supplier(s) to ensure
delivery and quality

44
Q

Managerial Accounting Today: TQM

A

Quality/TQM
o Total Quality Management (TQM) - a philosophy of zero
defects; all employees participate in managing quality
o Requires timely reporting on defective units, rework costs
and warranty costs
* Also non-financial information such as customer satisfaction,
service calls
o Ultimately leads to product or process redesign to reduce or
eliminate defects

45
Q

Managerial Accounting Today: ABC

A

Activity-Based Costing (ABC)
o Traditionally, overhead allocated to a product or service unit
based on labor or machine hours
o As production methods have evolved, overhead allocation
needed to change as well
o With ABC, overhead is allocated based on each product’s
use of economic resources as it undergoes various activities
(number of orders or number of machine set ups)
* Underlying concept: activities, rather than units, cause or
drive overhead
o Results in more accurate product costing and scrutiny of all
activities in the value chain

46
Q

Managerial Accounting Today: Theory of
Constraints

A

Theory of constraints (TOC): process used to identify and
manage constraints within the production system
o Constraint: something that prevents a company from
producing as many units of product or service units as they
wish; puts a limit on profitability
* TOC helps to identify ‘bottlenecks’: constraints within the
value chain that limit a company’s profitability
* Helps achieve overall goals of the company, particularly
profits

47
Q

Managerial Accounting Today: Lean
Manufacturing (1 of 2)

A
  • Today most products require little direct labour to
    complete, due in large part to advancements in
    automation.
  • Customers now dictate requirements to suppliers and
    often look for smaller quantities of individualized
    products.
  • Lean manufacturing was developed in response to this
    changing manufacturing environment.
  • Goal of lean manufacturing: eliminate waste and
    concentrate on meeting customer needs
48
Q

Managerial Accounting Today: Lean
Manufacturing (2 of 2)

A
  • Researchers have highlighted five basic principles that are
    crucial to the lean thinking process:
    1. Define value
    2. Identify the value stream
    3. Make the value stream flow
    4. Implement a pull system
    5. Strive for perfection
49
Q

Managerial Accounting Today: Balanced
Scorecard

A
  • A performance-measurement approach to evaluate
    operations in an integrated fashion
    o Uses both financial and non-financial measures
  • Balanced scorecard metrics: Financial; Internal Business
    Process; Customer; Learning and Growth
  • Links performance measures to overall company
    objectives
50
Q

Explain the difference between a merchandising and
a manufacturing income statement.

A

he difference between a merchandising and a manufacturing income
statement is in the cost of goods sold section. A manufacturing cost of goods sold section shows beginning
and ending fi nished g

51
Q
A

ACCT323 (6 decks)

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