validation test 2 Flashcards
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Management accounting
- Preparation of accounting reports for internal users.
- Includes:
- Product manufacture cost
- Product break-even point
- Expected cash at bank balance of a business for each of the next 12 months.
Accountant
- Important in business management.
- Prepare financial statements, budgets payroll and individual and company income tax returns.
- Calculate new product costs, break even points.
- Periodic review of the internal control system of a business.
Internal auditing
- The checking of the operating systems of a business to ensure that they are working properly.
- A review of the internal control system efficiency.
- a review of other systems’ efficiency, ie, the supply chain.
- A check that the policies of the business are being followed and that the business is complying with all laws.
- The detection of errors made in the accounting system.
External auditing
- The checking of the external accounting reports of a business to ensure that these reports are correct and complete.
- External auditor conducts an independent review of a business and protects the users of the financial statements prepared by a business.
- The external auditor expresses an opinion as to whether or not the financial statements of a public company:
- Give a true and fair view of the company’s financial position.
- Comply with the AASB Accounting Standards.
- The external audit process gives confidence to shareholders and potential investors in public companies that the financial statements accurately reflect the financial performance and health of the company.
- The external auditor must inform ASIC of any breach of the Corporations Act and of any failure by a reporting entity to comply with the AASB Accounting Standards.
- The external auditor is appointed by the shareholders and is re-appointed at the annual general meeting.
Ethics
- A set of principles that help people decide what is right or wrong.
1. Employee, overseas worker, foreign customer and investor exploitation.
2. Acceptance of gifts from suppliers.
3. Breaches of confidentiality.
4. Conflicts of interest.
CSR
Exists when a business builds a concern for the protection of the environment and of the good of society into its activities.
Advantages:
- Community respect and admiration.
- More enthusiastic and better motivated employees.
- A greater ability to recruit high quality employees.
Costs:
- Cost of community support programs run by a business.
- Cost of producing CSD reports.
- Cost of protecting the environment.
Cash management
- Cash handling should be separated from cash transactions.
- All cash receipts should be banked daily.
- All payments should be approved by a senior employee and large payments should be approved by two employees.
- Cash budgets should be prepared on a continuing basis.
Accounts receivable management
- Should conduct credit checks before selling inventory on credit and may impose credit limits on new consumers.
- Monthly statement should be sent to all debtors containing all transactions taken place during the month and amount owing at end of month.
- Business may follow up overdue debtor accounts as soon as they exceed payment date.
- Recording of debtor transactions should be separated from cash handling to prevent employee theft and creating false entries to cover it up.
Inventory management
- Inventory handling should be separated from inventory recording transactions.
- Inventory should be stored in a secure location. Access should be restricted.
- Inventory records should be maintained using the perpetual inventory system.
Cash accounting
Method of profit calculation in which income is recognised as existing when cash is received and an expense is recognised as existing when it is paid.
Accrual accounting
Method of profit calculation in which income is recognised as existing when a service has been carried out or when inventory has been sold and an expense is recognised as existing when it is consumed.
Cost leadership
- When a business has and is able to sell its products at lower prices than competitors.
- May be achieved by:
- Setting up large retail chain shops.
- Buying bulk at lower prices.
- Having a management team focused on cost saving solutions.
Product differentiation
Occurs when a business offers customers a product which has superior benefits to competing products.
Strategic Initatives
A major plan of a business that once implemented, is likely to have a significant impact on the business future.
Performance management
Process in which employees of a business are made aware of the level of performance expected of them and involves the periodic review of the performance.
