Sophia Managerial Accounting Flashcards
What is an Accounting System?
It is an information system designed to provide relevant financial information on the resources of a business and the effects of their use.
What is Accounting?
A measurement and communication process used to report on the activities of profit-seeking business organizations and not-for-profit organizations.
What is bookkeeping?
A process that records the routine economic activities of a business.
Accounting is divided into what 2 categories?
- Financial accounting for those outside a business and
- Managerial accounting for those inside a business.
What is the purpose of Financial Accounting and what is it?
Purpose: This type of accounting provides financial information to external decision-makers.
What it is: The organization of information that appears in financial statements that are intended primarily for external use.
What is the purpose of Managerial Accounting and what is it?
Purpose: This type of accounting provides financial information for internal decision-makers.
What it is: The internal use of financial AND NON-FINANCIAL information by an organization’s managers to control or direct a company or one of its segments.
What type of stakeholders need financial accounting information?
Stockholders and creditors need this type of accounting information.
What are financial statements?
These are formal reports that provide information on a company’s financial position, cash inflows and outflows, and the results of operations. They are often published in annual reports.
What are annual reports? and what is in them?
- Contains financial statements as well as the 2. independent auditor’s opinion as to the fairness of these financial statements as well as
- information about the company’s activities, products, and plans.
What does GAAP stand for?
Stands for Generally Accepting Accounting Principles.
Aside from external/internal, how else is Financial Accounting different from Managerial Accounting?
Managerial accounting focuses on separate parts/segments of a company, rather than the company as a whole. In contrast, financial accounting relates to the company as a whole.
What is a CPA?
Certified Public Accountant - often performs audits. Performs them by using the financial statements prepared by the management accountants; thus, the financial statements are representations of internal management, no this external firm.
What are the 4 major types of internal management decisions that are facilitated by managerial accounting?
These decision types are supported by this type of ________ accounting:
1. Financial decisions: what amounts of capital (funds) are needed to run the business, and whether to secure funds from owners (Stockholders) or creditors.
2. Resource-allocation decisions
3. Production decisions
4. Marketing decisions
How do Financial Accounting and Managerial Accounting differ in which accounting principles they must follow?
Financial accounting must follow GAAP and Managerial Accounting doesn’t have to, because it’s for internal use.
Between Financial Accounting and Managerial Accounting, which is forward-looking and which is past-looking?
Managerial Accounting is forward-looking with estimates for the future budgeting and decision-making, and Financial Accounting uses historical data
What level of detail is presented for Financial Accounting vs Managerial Accounting?
Financial Accounting looks at
- summary data
- costs
- revenue
- profits
Managerial Accounting presents more detailed data about the
- product
Which type of accounting requires more detailed info: Financial or managerial?
Managerial
Company hierarchy (board, CEO, VPs)
Top of org chart: Board of Directors (they select the CEO)
CEO (President of the company):
- Develops a plan to meet the company’s short and long term plans.
- Serves as a middle man between the management of the company (who execute on plans) and the Board.
- Delegate responsibility of implementing the org’s plans to the VPs of the organization.
Line position vs Staff position. What they are plus examples
Line position = directly involved in the process of providing goods or services to customers
* e.g., COO, Production Manager, Sales Manager
Staff position = support Line Positions, and might include:
* Chief Financial Officer, treasurer, payroll processing manager
What is a Board of Directors?
Individuals who are elected by the stockedholders of a company for the purpose of developing strategic goals.
What is an organizational chart?
A chart that shows the relationship between departments and divisions, and the managers that are responsible for each segment.
Strategic Planning vs Operational Planning
Strategic Planning = Long term strategies to achieve company goals
Operational Planning = Short term actions within day-to-day operations. Operational plans frequently max a 1 year duration, but could span a week, month, or quarter, depending on how soon the company expects to achieve the goal.
What are the “Big Four” public accounting firms?
These firms are Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers. These are the world’s largest and most prestigious audit, tax, and professional service companies
They perform more than 80% of the public company audits in the United States.
How is management accounting different from public accounting?
Management accountants work for/within one company. Companies may have multiple management accountants.
