MGMT 321-Chapter 13 Flashcards
Tax accounting
An accounting approach based on specific accounting requirements set by governmental taxing agencies
Managerial accounting
Accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business.
Financial accounting
Formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, & regulators.
Business entity concept
Concept that a business has an existence separate from that of its owners
Going concern concept
The accounting concept that a business is expected to continue in existence for the foreseeable future.
Accounting equation
Assets=liabilities + owners equity
Owners equity
Assets-liabilities
MACRS rate
IRS acronym for the modified accelerated cost recovery system. Let’s taxpayers depreciate more of the cost earlier in the life of a capital expense
Depreciation
Regular and systematic reduction in income that transfers asset value to expense over time
Articulate
Concept that information flows from the income statement through the statements of retained earnings and owners equity to the balance sheet.
Financial flexibility
Business’ ability to manage cash flows in such a manner that the company can respond appropriately to unexpected opportunities and needs
Financial strength
Ability of a business to survive adverse financial events
GAAP
Generally accepted accounting principles are the standardized rules for accounting procedures set out by the financial account standards board & used in all audits and submissions of accounting reports to the government
Cost volume profit analysis
Managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize profits
Economy of scale
Idea that it is cheaper to make many of an item than few.
Pro forma
Latin for “in the form of” when used to describe financial statements, indicates estimated or hypothetical info.
Activity based cost estimates
An accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service.
Variance
Difference between an actual and budgeted revenue or cost
Variance analysis
Process of determining the effect of price and quantity changes on revenues and expenses
Favorable/unfavorable variance
Label applied to variances to indicate their effect upon the income statement; favorable variances would result in profits being greater than budgeted, all other things being equal; unfavorable variances would result in profits being less than budgeted, all other things being equal
Three types of accounting
- Managerial
- Tax
- Financial
