Grüning Definitions Flashcards
Accounting
- process of identifying, measuring and communicating
- economic information to permit informed judgments and decisions
- by users of information
Cost accounting
Accounting concerned with cost accumulation for inventory valuation to meet the requirements of external reporting and internal profit measurement.
Financial accounting
Accounting concerned with the provision of information to parties that are external to the organization
Management accounting
Accounting concerned with the provision of information to people within the organization to aid decision-making and improve the efficiency and effectiveness of existing operations.
Stakeholders
Various parties that have an interest in an organization. Examples include managers, shareholders and potential investors, employees, creditors and the government.
Conversion cost
The sum of direct labour and manufacturing overhead costs; it is the cost of converting raw materials into finished products.
Cost object
Any activity for which a separate measurement of costs is desired.
- “cost of something”
Direct labour costs
Labour costs that can be specifically and exclusively identified with a particular cost object.
Direct material costs
Material costs that can be specifically and exclusively identified with a particular cost object.
Fixed costs
- Costs that remain constant for a specified time period and which are not affected by the volume of activity.
- decreases when looked at on a per unit basis
Indirect costs
- Costs that cannot be identified specifically and exclusively with a given cost object, also known as overheads.
- sometimes direct cost are treated as indirect cost for economic reason
- indirect costs are assigned to cost object
Marginal cost
The additional cost of one extra unit of output.
Overheads
Costs that cannot be identified specifically and exclusively with a given cost object, also known as indirect costs.
Period costs
Costs that are not included in the inventory valuation of goods and which are treated as expenses for the period in which they are incurred.
Prime cost
The sum of all direct manufacturing costs.
Product costs
- Costs that are identified with goods purchased or produced for resale and which are attached to products and included in the inventory valuation of goods.
- “inventories”
Responsibility accounting
Accounting that involves tracing costs and revenues to responsibility centres.
Responsibilty Centre
A unit or department within an organization for whose performance a manager is held responsible.
Semi-fixed costs
Costs that remain fixed within specified activity levels for a given amount of time but which eventually increase or decrease by a constant amount at critical activity levels; also known as step-fixed costs
Step-fixed costs
Costs that remain fixed within specified activity levels for a given amount of time but which eventually increase or decrease by a constant amount at critical activity levels; also known as semi-fixed costs.
Sunk costs
Costs that have been incurred by a decision made in the past and that cannot be changed by any decision that will be made in the future.
⇒irrelevant for decision-making
Cost
monetary measure of resources sacrificed/forgone to achieve a specific objective
Cost Collection System
- accumulate cost by classifying into categories
2. assign costs to cost objects
Variable Costs
- vary in direct proportion with activity
- is constant when seen on a per unit basis