Chapter 13 - Managerial Accounting Flashcards
Managerial Accounting supplies information to internal users for the following activities:
1) Planning
2) Controlling
3) Decision Making
Planning
The detailed formulation of action to achieve a particular end.
Controlling
Monitoring a plan’s implementation and taking corrective action as needed.
Decision Making
The process of choosing among competing alternatives.
Features of Financial Accounting:
- Externally focused
- Must follow externally imposed rules
- Objective financial information
- Historical orientation
- Information about the firm as a whole
- More self contained
Features of Managerial Accounting:
- Internally focused
- No mandatory rules
- Financial and non-financial information; subjective information possible
- Emphasis on the future
- Internal evaluation and decisions based on very detailed information
- Broad, multidisciplinary
Two general categories of Strategic Positioning
1) Cost leadership: provide same or better value to customers at a lower price.
2) Superior products through differentiation: increase customer value by providing something to customers not provided by competitors.
Value Chain
The set of activities required to design, develop, produce, market and deliver products and services, as well as provide support services to customers.
Continuous Improvement
The continual search for ways to increase the overall efficiency and productivity of activities by reducing waste, increasing quality, and managing costs.
Total Quality Management
A philosophy in which manufacturers strive to create an environment that will enable workers to manufacture perfect (zero-defect) products.
Lean Accounting
Organizes costs according to the value chain and collects both financial and non-financial information. The objective is to provide information to managers that support their waste reduction efforts and to provide financial statements that better reflect overall performance.
Controller
Chief accounting officer. Responsible for both internal and external accounting. Direct responsibility for internal auditing, cost accounting, financial accounting and reporting, and systems accounting (analysis, design, internal controls). In smaller company, may also serve the functions of treasurer.
Treasurer
The treasurer is responsible for the finance function. The treasurer raises capital and manages cash and investments. The treasurer may also be in charge of credit and collection and insurance.
Cost
The amount of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization.
Expenses
Expired costs. As costs are used up in the production of revenue, they are said to expire. On the income statement, expenses are deducted from revenues to determine income (also called profit).
Price
Revenue per unit.
Accumulating Costs
The way that costs are measured and recorded.
Assigning Costs
The way that a cost is linked to some cost object.
Cost Object
Any item for which costs are measured and assigned. Literally a categorization of costs relating to items such as product, customer, department, project, geographic region, plant, etc.
Direct Costs
Costs that can be easily and accurately traced to a cost object. Generally, the relationship between the cost and the object can be physically observed and is easy to track.
Indirect Costs
Costs that cannot be easily and accurately traced to a cost object.
Allocation
The process by which indirect cost is assigned to a cost object by using a reasonable and convenient method.
Variable Cost
A cost that increases in total as output increases and decreases in total as output decreases.
Fixed Cost
A cost that does not increase in total as output increases and does not decrease in total as output decreases. i.e. property taxes on a factory stay the same no matter how much is produced
