Lecture 1 Flashcards
What does managment accounting mean?
What does finacial accounting mean?
Managment accounting = focus on internal within the company
Finacial accounting = focus on external outside the compnay
Difference between management and financial accounting
1. Legal
2. Users
3. Precisions
4. Rules
5. Reporting
6. Scope
7. Frequency
8. Format
Legal
Managment : no
Financial : yes
Users
Managment = internal
Financial = internal and external
Precisions
Managment : as accurate as possible
Financial : true and fair
Rules
Managment: no rules govern them but established techniques are used
Financial : GAAPS ( GENERAL ACCEPTED ACCOUNTING PERIOD ) OR IFRS ( INTERNATIONAL FINANCIAL REPORTING STANDARDS) all European counties needs to follow IFRS
Reporting
Management : past and present to make decisions
Financial : past data
Scope
Management : segments or decision whatever is needed by business
Financial : whole organisation
Frequency
Managment : as required
Financial : annual
Format
Managment : no set format
Financial : governed by company act
Why do managers need to understand costs? 3 reason
- Setobjectives
2.Implement plans - Decision making
How do they do decision making, planning and process control? 6 ways
- Idenfity a objective
- Set alternative course of action
- Select appopriate course of action
- Implement the decision
- Compare actual and planned outcome
- Response to divergence from plan
What is cost objective?
What is cost allocation system two stages?
Cost of making something
- Cost of allocation system two stages:
1. Cost classification = classifying into certain categories such as type of expense ( direct labour and materials ) and behaviour of of cost ( fixed or variable )
2. Cost assignment = assigning these cost into cost objectives
What is direct costs?
What is direct materials?
What is direct labour costs ?
What is indirect costs?
Direct materials: Most likely varible costs as we do know how much it cost to make it
Direct materials : how much matierals for certain product
Direct labour costs : how much cost for a certain product
Indirect costs: also known as overheads we do not know how much it is so we use cost allocation.
They can be indirect labour and materials
What is 6 manufacturing costs on the statement side of cost of goods?
What is product cost? + where is it recorded?
What is period costs? + where is it recorded?
- Direct matierals
- Direct labour costs
- Prime costs ( direct material + direct labour )
- Manufacturing overhead ( indirect costs )
- Total manufacturing costs ( prime costs + manufacturing overhead )
- Non manufacturing costs ( cost that don’t relate to making a salary?
Product costs = cost that are attached to the product and included in stock such as direct materials and labour.
Recorded in manufacturing costs
- can be recorded as asset in sfp
- can be recorded as expense in income when product is sold
Period costs : cost that are not attached to the product and be regarded as expenses
Recorded in non manufacturing costs
Also recorded as expense in income statement.
What is manufacturing costs?
What is non manufacturing costs?
Manufacturing costs:
1. Direct matierals
2. Direct labour
3. Manufacturing overhead
Non manufacturing overheads
- admistrive overheads
- marketing overheads
What is variable costs?
What is fixed costs?
What is semi fixed costs?
What is semi variable costs?
What is avoidable and unavoidable costs?
What is relevant and irrelevant costs?
What are sunk costs?
What is incremental costs?
What is marginal?
Variable costs: cost that change
Fixed costs : cost that don’t change
Semi fixed costs : start of fixed end up variable
Semi variable costs : has both components of variable and fixed costs
Avoidable costs (variable costs ) cost that can be changed. Unavoidable costs can not be changed ( fixed costs )
Relevant costs can be changed but irrelevant costs can not be changed
Sunk costs = cost that are unaffected ( deprication )
It is irrelavnet for decision making
Incremental = additional costs from production
Marginal = shows the additional costs
