Chapter 1 Reading Flashcards
what does management accounting do?
measures, analyses and reports financial and non-financial information
what is the intention of management accounting?
to primarily assist managers in fufilling the organisation’s goals
what does management accounting contain?
accounting, finance & management
what do managers use to gain insights into the data they collect?
data analytic techniques
‘big data’
what does management accounting do for shareholders?
protects, preserves and increases value for shareholders
what do management accountants engage in?
the identification, generation, presentation, interpretation and use of relevant information serve numerous purposes
what questions do management accountants ask themselves?
how will this information help managers do their job better?
do the benefits of producing this information outweigh the costs?
does the information recognise what is specific about the organisational context?
what are the broad differences between MA & FA?
regulations
range & detail of information
reporting interval
time period
regulations for MA = ?
MA isn’t externally regulated
range & detail of information for MA = ?
MA reports include financial and non-financial information
reporting interval for MA = ?
MA reports may be produced as frequently as they’d like
time period for MA = ?
MA can include, past, present, and future information
purpose of info for MA & FA = ?
MA helps managers make decisions to fulfil the organisation’s goals
FA communicates financial info to external users (investors, banks, regulators)
primary users for MA & FA = ?
MA - managers
FA - external users (e.g., investors, banks, regulators, suppliers etc.)
what is the focus & emphasis of MA & FA?
MA is future oriented (projections, budgets for the future)
FA is past oriented (analysing a past period)
rules of measurement & reporting = ?
for MA, internal measures & reports mustn’t follow relevant accounting standards
for FA, statements must be prepared and certified by external, independent auditors
time span & type of reports = ?
MA reports can vary, being daily or every decade
FA reports are typically annually or quarterly
behavioural implications of FA & MA = ?
MA’s designed to influence managerial behaviour
FA also influences managerial behaviour as management’s remuneration correlates with financial performance
cost accounting = ?
measures & reports financial & non-financial information related to the organisation’s acquisition or use of resources
provides information for MA & FA
a central task of managers is…?
cost management
cost management = ?
actions by managers undertaken to satisfy customers while continuously reducing & controlling costs
are MA and cost accounting interchangeable?
yes
is cost management solely about reducing costs?
no
what are the two strategies companies can use to grow their profits?
cost leadership - providing quality goods for low prices
product differentiation strategy - providing unique products for a premium
what information does MA provide to help formulate strategies?
info about company costs, efficiency & productivity relative to competitors or prices a company can charge
bargaining power of customers = ?
when customers can demand lower prices
bargaining power of suppliers = ?
how expensive inventory are to companies
what questions do companies typically ask management accountants regarding pricing and strategy?
bargaining power of customers/suppliers?
are there substitutes to our products/services in the marketplace?
will adequate cash be available to fund the strategy?
what are the purposes of the accounting system in an organisation?
- formulating overall strategies & plans
- resource allocation decisions
- cost planning & cost control
- performance measurement & evaluation of people
- meeting external regulatory requirements
formulating overall strategies & plans = ?
new product development & investment plans, seeking customer, market & supplier information
resource allocation decisions = ?
involves reports on profitability/ROI
cost planning & cost control = ?
involves reports on revenues, costs, assets, liabilities etc.
performance measurement & evaluation of people = ?
includes comparisons of actual results with planned results
meeting external regulatory & legal reporting requirements = ?
reports must adhere to authoritatively determined guidelines
influences on changes in accounting information = ?
- increased change in business world
- shorter product life cycles
- digital transformation of companies
- increased uncertainty
- increased focus on customer satisfaction
- more complex business transactions
- the rise of intellectual capital
planning = ?
choosing goals, predicting results under various ways of achieving those goals and then deciding how to attain the desired goals
budget = ?
a quantitative expression of a plan of action and an aid to the coordination and implementation of the plan
control = ?
covers both the action that implements the planning decision and the performance evaluation of the personnel and operations
management by exception = ?
the practice of concentrating on areas that aren’t operating as expected and placing less attention on areas operating as expected
variance = ?
the difference between an actual result and the budgeted amounts
what do well conceived plans include?
flexibility, so managers can seize unforeseen opportunities
feedback = ?
involves managers examining past performance and systematically exploring alternative ways to improve future performance
uses of feedback = ?
- tracking growth (sales, revenue, profit margins etc)
- searching for alternative means of operating
- changing methods for making decisions
- making predictions
- changing operations
- changing the reward system
scorekeeping = ?
function that involves accumulating data and reporting reliable results to all levels of management
e.g., recording of sales, purchase of materials, payroll payments
attention directing = ?
function that involves making visible both opportunities and problems on which managers need to focus
e.g., highlighting rapidly growing markets
problem solving = ?
function that involves comparative analysis to identify the best alternatives in relation to the organisation’s goals
what are the three management accountant’s functions?
scorekeeping
attention-directing
problem-solving
what’s the purpose of the cost-benefit-context approach?
provides a solid point for analysing how, why, and with what effects accounting is used in a business
key themes of planning & control = ?
- customer focus
- value-chain & supply-chain analysis
- continuous improvement benchmarking
value chain = ?
the sequence of business functions in which utility/usefulness is added to the products/services of an organisation
supply chain = ?
describes how the flow of goods, services & information
what is the value chain flow?
R&D
product design
production
marketing
distribution
customer service
R&D = ?
the generation of & experimentation with ideas relating to new products
product design = ?
detailed planning & engineering of products
production = ?
the coordination & assembly of resources to produce/deliver a product/service
marketing = ?
the manner by which people learn about the value of the product/service
distribution = ?
the mechanism by which products are delivered to customers
customer service = ?
the support activities provided to customers
key success factors = ?
factors that directly affect customer satisfaction
cost, quality, timeliness, innovative products, sustainability
why is sustainability important?
it’s important to investors & other external stakeholders as part of ethics
digitalisation = ?
the process whereby use of digital technologies changes the business model & provides new revenue & value producing possiblities
blockchain = ?
an accounting technology described as a ‘distributed ledger’ which records transactions continuously
big data & analytics = ?
make possible the provision of insights drawn from large amounts of data
the cloud = ?
refers to services where information & files are kept on servers connected to the internet
MA is used to provide…
future-oriented information to help managers make decisions & pursue an organisation’s goals
FA is used to…
develop reports for external users on past financial performance
accounting system’s 5 broad purposes = ?
formulating overall strategies
resource allocation decisions
cost planning & cost control
performance measurement
meeting external regulatory obligations
accounting influences…
planning, control & decision making through budgets & other financial benchmarks
management accountants perform which 3 functions?
scorekeeping
problem-solving
attention-directing
how do companies add value?
through R&D, design, production, distribution, marketing, customer service
fundamental ethical principles = ?
integrity
confidentiality
professional behaviour
professional competence & due care
objectivity
