Management Accounting Flashcards
Managerial Accounting
It is the study of managerial aspect of accounting. . It is the system of accounting which helps management in carrying out its functions more efficiently. It is helpful to the management in the formation of policy, control of execution and appreciation of effectiveness.
It is a method of accounting that creates statements, reports, and documents that help management in making better decisions related to their business’ performance. Managerial accounting is primarily used for internal purposes.
two feature of Managerial Accounting
a. Providing Accounting Information
b. Use of Special Techniques and Concept
c. Taking Important Decisions
Fund flow analysis
A means of analysing the movement of funds within a company by comparing successive balance sheet to note where additional funds have come from and where they have been deployed in the business.
Fund flow statement
Funds flow statement is a statement which discloses the analytical information about the different sources of a fund and the application of the same in an accounting cycle.
It deals with the transactions which change either the amount of current assets and current liabilities, fixed assets, long-term loans including ownership fund.
Difference between Balance sheet and fund flow statement on the basis of preparation
Balance sheet/Fund flow statement
a. Prepared for a particular day/ for a particular accounting period.
b. Prepared with P&L/ Prepared with two consecutive balance sheets.
c. Prepared to show financial position/ Prepared for financing and business decisions
Working capital
Working capital, also called net working capital, represents the difference between a company’s current assets and current liabilities. Working capital is a measure of a company’s liquidity and short-term financial health.
Is redemption of debentures an application of funds or source of funds?
Redemption of debentures is an application of fund.
Is overdraft an operating expense?
No its not an operating expense as overdraft indicates a situation where there isn’t excess money to cover a transaction or withdrawal but bank allows it anyway.
Budget
A budget is the quantitative or monetary presentation of business plans and policies to be pursued in the future period of time.
Budgetary control
Budgetary control is a system of controlling costs which includes the preparation of budgets, co-ordinating the departments and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve maximum profit.
Budget period
Budget period is the period for which a budget is prepared and implemented. Usually budgets are prepared for one year. But sometimes budget is prepared for a longer period of time, say 5 years or 10 years.
Fixed budget
According to CIMA, “a fixed budget, is a budget designed to remain unchanged irrespective of the level of activity actually attained”, In a fixed budget system, once the budget has been determined, it is not changed, even if the real activity changes.
Master Budget
Master budget is the consolidated form of various functional budgets after making necessary additions and deletions. A master budget represents the organisation as a whole and will show the details regarding expected activities of all departments of the organisation.
Horizontal Analysis
Horizontal Analysis: It is also called trend analysis. Comparison of many years of financial data is known as horizontal analysis. The result of analysis of many years is presented horizontally over a number of columns.
External Analysis
The analysis done by outsiders who have no access to detailed internal accounting records of a business firm is called external analysis. These outsiders include owners, creditors, bankers, present and prospective investors, customers, government and governmental agencies, and the general public. These external parties make analysis solely on the basis of published data.
