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Accounting for Managers > Week 1 > Flashcards

Week 1 Flashcards

1
Q

What is Accounting

A

Collecting, analysing, communicating financial information

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2
Q

What is Accounting used for?

A

Provides financial information to help different user groups make more informed decisions

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3
Q

What informed decisions can it help users make?

A

Investor- to invest? Lender- to lend money? Supplier- to sell goods? Manager- develop new product?- increase operating capacity?

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4
Q

Accountancy jobs

A

Financial Accountant, Management Accountant, Cost Accountant, Auditor, Tax Consultant, etc.

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5
Q

Accounting use in management

A

CEO/Managing director- which area to expand?
Sales director/manager- cost and price of product?
HR Director- costs and benefits of employee wellbeing scheme?
Marketing manager- Worth spending £Xm on new advertising campaign?

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6
Q

What is financial accounting?

A

Provides information to users outside the organisation

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7
Q

What documents are used in financial accounting?

A

Financial Statements:
SOPL (Income Statement), SOFP (Balance Sheet), Statement of Cash Flows

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8
Q

What is the time frame of financial accounting?

A

Information provided on past (historical) produced after accounting year end

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9
Q

Reporting cycle of financial statements

A

Annual, Semi-annual, Quarter

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10
Q

What format?

A

Standard as regulated by Company law and/or Accountong standards

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11
Q

What type of information provided?

A

Objective and verifiable

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12
Q

What is a bookkeeping system?

A

Collection and organisation of data and transactions

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13
Q

What is management accounting

A

Provides information to internal users (manager) and concerned with future

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14
Q

What does management accounting help with?

A

Decision making process and controlling resources

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15
Q

Reporting cycle of Management accounting

A

As frequently as needed by managers

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16
Q

Features of management accounting

A

More frequent than financial
Non subject to regulation- meets needs of managers
Information from various sources (financial and non- financial
Non- verifiable information used

17
Q

What is business

A

Organisation or enterprising entity engaged in commercial, industrial or professional activities. Can be profit or non profit.

18
Q

What is a plc?

A

Shares listed and traded on stock exchange

19
Q

What is an ltd?

A

Shares cant be traded on stock exchange- shares held by members of family or larger company

20
Q

What is limited?

A

Shareholders (investors) liability limited to amount they invest in company . If company becomes insolvent and can pay liabilities shareholders do not need to use personal wealth to pay back liabilities.

21
Q

What is a sole trader?

A

A person in business alone
Capital raised by personal savings. loans from friends, banks etc
Liability unlimited- Creditors have right to require owner to use personal assets to pay back money

22
Q

Accounting Information System

A

Identify and capture information
Record information in systematic manner
Analyse and interpret information collected
Report information in a way which suits needs of user (financial statements)

23
Q

Capital

A

Amount owners have invested in business

24
Q

Drawings

A

Amounts taken out of business for owners personal use

25
Q

Purchases

A

Cost incurred by business to buy goods it plans to sell. Recognize when goods recieved from supplier

26
Q

Sales/Revenue/Turnover

A

Income earned from selling goods/services

27
Q

Expenses/Costs

A

Costs incurred by business to enable trading

28
Q

Accounting Conventions

A

Generally accepted rules accountants follow when preparing financial statements

29
Q

Business entity convention

A

Business owner and company treated separate. Very clear distinction between business and personal assets- only business finances reported

30
Q

Prudence

A

Caution when preparing financial statements
Revenue/Profits not anticipated- recognised only when form of cash/other assets

31
Q

Prudence 2

A

Expected expense and losses allowed to be recognized
Dont overestimate revenues/underestimate expenses

32
Q

Going concern

A

Assumes business will continue operations for foreseable future unless reason to believe otherwise

33
Q

Matching

A

When measuring income, expenses matched to revenues they helped generate

34
Q

Example of Matching. Start business with £40 of own money. Buy Christmas card for £40. Sell 3/4 for £45

A

Income Statement
Sales revenue £45
Cost of Goods sold £30
Profit £15
(Expenses/cost of goods sold matched to revenue of selling 3/4 Christmas Card

Accounting for Managers (2 decks)

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