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AAT - Management Accounting: costing > Management accounting > Flashcards

Management accounting Flashcards

1
Q

Why do I need to need to know about costing in managmenet accounting ? p1

A

PED

  • Purpose of internal reporting/ providing accurate info to management
  • different costs & revenue reporting different responsibility centers
  • ethical principles in management accounting
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2
Q

What IS accounting? P2

A
  • System - tracking money
  • insufficient funds & no profit - bankruptcy
  • recording , preparing & interpreting business transactions
  • primary source of info - owners & managers - plan & control activities / decision making
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3
Q

What is financial accounting ?

A
  • Monetary amounts - division into categories/ recorded in accounting records
  • presentation of financial info
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4
Q

Why must the presentation of finanical information be consistent?

A
  • performance assessed over time
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5
Q

What are the two main financial statements?

A
  • statement of profit/ loss
  • statement of financial position
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6
Q

What is management accounting concerned with?

A

info for management - planning, control, & decision making

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7
Q

How can management accounting help with planning?

P4

A
  • short term/ long term budgets & forecasts
  • highlights:
    shortage of resources
  • bottlenecks in productions
  • limitation effect
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8
Q

How does management accounting help with controlling expenditure?

A
  • comparison - actual results v budgeted plans
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9
Q

How does management accounting help with decision making ? P5

A
  • costs of product /services = effective sales prices
  • profitability & demand of products = maximization of profits
  • return on capital equipment - info needed on costs incurred & savings generated
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10
Q

What tasks my management accountants undertake? - P5

A

AREA O

A - ascertain costs

R- reporting system

E- establishing budgets

A - analysing savings / inefficiencies

O - operating specific costing systems

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11
Q

What can management accounting also be referred to as ?

A

Cost accounting

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12
Q

Why would management accounting be referred to as costs accounting? P6

A
  • Question - how much does it costs to ?
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13
Q

What type of data does management accounting work with & why? P6

A
  • Historical data
  • estimates/ forecasts of future data
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14
Q

How can management accountants present their information? p6

A
  • Variety of types
  • number of different formats
  • key - accurate , useful, relevant & timely
  • no set format - legislation
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15
Q

When would management accountants need to provide info to external stakeholders? P7

A

MEB

Mortgage - Freehold of a factory future revenue & costs

External accountant - tax advise - future projections and budgets

Bank - loan for product - fuiture revenue & costs - profitable products / timing of cahs flow - loan repayments

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16
Q

How must care be taken when producing management information? P8

A
  • Not misstated
  • estimations = reasonable & realistic assumptions
  • professional competence - making estimates/ preparation of forecasts & budgets
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17
Q

What roles would extend costs accounting into management accounting?

A
  • preparing budgets, forecasts, other control data
  • creation reporting system = corrective action
  • info for decision making .e.g. pricing
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18
Q

What is the result of artificially increasing profit? P8

A
  • forecasts & budgets appear > actual results
  • financial acking not given
  • increased risk of making loss
  • unrelistic targets - no bonus achieved
  • loan repayment issues
19
Q

What two things can artificfically increasing profits result from ?

A
  • Overstating revenue
  • Understating costs
20
Q

What is the result of aritifically decreasing profits? P8

A
  • Financial backing not given
  • missed opportunities - expansion
  • Easily paid bonuses
  • higher costs to departments - inaccurate absorption rate
21
Q

Why must care be taken when selecting an inventory valuation method ? - P9

A
  • neither artificially increased
  • nor suppressed to suit needs of those responsible
22
Q

What can profit manipulation from incorrect inventory valuation lead to ?

A

Financial backing - no most appropraite projects

Borrowing underserved - deliberate profit manipulation

increased risk to jobs - poor management decisions from incorrect profit projections

23
Q

What is the purpose of the code of ethics?

A
  • basis for ethical codes
  • accountancy bodies : AAT , ICAEW , ACCA, and CIMA
24
Q

What approach does the code of ethics adopt?

A

Pinciples - based approach

25
Q

What should the role of management accountants be in accordance with the code of ethics?

A
  • Not just - satisfy individual client/employer need
  • public interests
  • compliance - fundamental ethical requirements of IFAC code
26
Q

What are the five key principles of the code of ethicsfor professional accountants?

A
  • Integrity
  • Objectivity
  • Professional competence and due care
  • confidentiality
  • professional behaviour
27
Q

What is integrity ?

A

Straightforwarrd and honest - professional work

28
Q

What is objectivity ?

A

bias , conflict of inteest , undue influence of others

29
Q

What is professional competence and due care?

A
  • professional knowledge and skill
  • competent professional service
  • practice, legislation , and techniques development
30
Q

What is confidentiality ?

A
  • respect - info acquired from professional and business relationships
  • non disclosure - unless legal / professional right/ duty
31
Q

What is professional behaviour?

A

non unprofessional behaviour - laws and regulations

32
Q

What can threats to compliance with the fundamental principles be?

A
  • General in nature
  • relate to specific circumstances of an appointment
33
Q

What do the 5 general categories of threats to the principles include?

A

Self interest threat

Self review threat

Advocacy threat

The familiarity/ trust threat

Intimidation threat

34
Q

What is the self interest threat to compilance?

A
  • financial/ other self interests conflict
  • direct/ indirect interest
  • fear - loss of engagement/ employement
35
Q

What is the self review threar?

A
  • product or judgement - member or firm
  • review your own work?
36
Q

What is the advocacy threat?

A
  • advocate for/ against
  • adversarial proceedings/ situation
  • individual circumstances
  • One side compatible - truthful and accurate
37
Q

The familiarity or trust threat?

A
  • knowledge
  • relationship
  • judgement
38
Q

What is the intimidation threat to compilance?

A
  • Threat
  • dominating personality
  • other pressures
  • actual or feared pressure
39
Q

What is a cost object?

A
  • Anything - cost ascertained to
  • e.g. cost units , cost centers
40
Q

What is a cost unit? - P9

A
  • single unit of output - costs charged
  • products manufactured - cars , telephones
  • Services provided - attendance to swimming pool
41
Q

What are costs centres ? - P10

A
  • any part of organisation - separate attribution
42
Q

What can costs centres be ? - P10

A
  • identified with/ allocated to costs centre
  • e.g. location , function (department) , activity , item of equipment
43
Q

What are costs centre managers in control of ?

A

costs collected - monitor and control costs

decisions - costs only - may be targets

AAT - Management Accounting: costing (10 decks)

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