Chapter 2: The Finance Functions Flashcards
What is the Finance Function responsible for?
Accounting Operations, Analysis, Planning, Decision Making and Control.
What are the 6 components of the Finance Function?
Financial Accounting, Management Accounting, Financial Planning/Analysis, Project Management/Appraisal, Treasury, Internal Audit.
[FA] What is the role of Financial Accounting?
To produce all of an organisations financial statements (financial position, profit/loss, cash flow, equity).
[FA] What are memorandum items?
Double entry systems and ledgers, they record transactions at point of sale but also again later in costings and incomings ledgers. 7 types; General Ledger, Cash Book, Receivable Ledger, Payable Ledger, Non Current Asset Ledger, Sales Day Book, Purchase Day Book.
[FA] How is a transaction recorded if it is not tracked at the point of sale?
As a historical transaction to be used in any auditing process.
[FA] What is internal Control or Stewardship?
The role of the financial accounting team to prevent, detect and amend errors as well as safeguarding company assets.
[FA] How does the FA team exercise control?
Secure Storerooms for inventory, Bank Cash soon after deposit, Purchase Invoices to check goods received, Payment after receipt of goods, Overtime authorised by managers not self, Credit checks on customers, Share Price accurately shows company performance.
[MA] What is the difference between management accounting and financial accounting?
Financial Accounts document what has happened and therefore this is fact and needs to be accurate. Management Accounting reports are not governed by regulation and can look to the future by reviewing the past.
[MA] What are the 6 functions of Management Accountants?
Drafting budgets based on projected profits, Evaluate reasoning behind budgets, Evaluate and control unit cost, Advice on a sales price for produced units, Evaluate business decisions like outsourcing or new sites, Calculate product break even points.
[MA] What and how often do Management Accountants present as findings?
Monthly so they have adequate time to respond to shocks, they will often use discounted cash flow analysis to determine results, opportunity costs and investment decisions within a budget limit.
[MA] What are budgets and what do they achieve?
Budgets are quantitative plans outlined in financial capacity they can be used for; Future forecasting, Planning, Co-ordination as a result of planning, Communication in a simple way, Control of spending, Authorisation of purchases on companies behalf, Motivation and Evaluation.
[FP/A] What are the roles of those working in financial planning and analysis?
They analyse the company and the markets and then make a plan for the future, their role is very similar to that of a management accountant.
[PM/A] What do those in roles of project management and appraisal do?
They create the plans for a project to ensure the benefits outweigh the costs. Timing issues can mean Net Present Value analyses need to be completed to ensure the project will still hold value when completed.
[PM/A] What is a project?
A discrete one-off endeavor with a set goal which can be a deliverable, action or result.
[PM/A] What has to be controlled in a project?
Costs (Initial estimation then monitoring), Time (Stick to plan as overdue projects incur extra costs), Quality (Lower quality= lower cost but at a certain level the client may reject the output leading to warranty payouts), Scope (Documentation on goals, outcome and coverage of project).
