Accounting for Management Flashcards
(28 cards)
Cost Accounting
- gathering of cost info and attachment to cost objects
- establishing budgets/standard costs, actual costs of operations, processes, activities, products
- analysis of variances/profitability
part of management accounting as provides bank of data to use
Management Accounting
- application of principles of accounting/financial management
- to create/preserve/increase value for shareholders
- using info to make decisions to achieve objectives
What are the five main areas of management accounting?
- Costing
- Planning
- Control
- Decision Making
- Performance Evaluation
Management Accounting- Costing area
- what is cost if goods/services?
- allow to assess profitability
- set prices
- value inventory
Why is planning important in management accounting?
- defining objectives to help set up budget
- assess purchasing/production requirements of 4Ms
- management must think ahead
What are the 4Ms?
- Materials
- Machine Time
- Manpower(Labour)
- Money
What are the stages of the planning process for management accounting?
- assessment stage - external environment, organisation, future, expectations
- objective stage- evaluate/create corporate objs - maximise SH wealth, profits
- Evaluation Stage - consider alternative ways to achieve objs
- The Corporate Plan - agree it
feeds into short term planning
- production plans
- resource plans
- product plans
- research/development plans
- these feed into detailed operational plans which ensure objs are implemented
How is the control stage used in management accounting?
- ensures plans are followed once they are made
- assess performance of organisation against deviations from operational plans and take corrective action
- review corporate plan to ensure objs can be achieved
- effective control requires planning
What is the decision making process within management accounting?
- identify objs/problems
- alternative solutions which might help
- collect & analyse relevant data for alternatives
- make decision- state expected outcome, ensure inkeeping with main goals
- implement
- obtain data about actual results
- compare actual with expected and evaluate (variance analysis)
How does performance evaluation feed into stages of management accounting?
- performance of divisions or employees
- compared against budgets, targets
- can create motivation
What is Antony’s belief about organisation control?
- should not be separated but split between who is making the decisions
Strategy- non- financial, external, long term
Tactics- medium term, linked to budgets & forecasts
Operations - short term, internal, detailed
What is involved in the strategic planning section of Antony’s ideology?
- deciding objs
- resources used to attain and policies used to govern use of the resources
- long term strategic planning
- corporate planning
- internal/external
- on ad hoc basis
- selection of products/markets
- level of profitability needed
- pur/dis subs/major NCA
What is involved in the Tactical Control section of Antony’s ideology?
- management control
- ensure resources (4Ms) obtained, used effectively & efficiently in accomplishing objs
- conversion of long term plan into series of short term plans for more specific areas of company
- budget control
- variance analysis
- cash flow
- internal
- routine/regularly prepared
Efficiency definition in use of resources?
- optimum output is achieve from input resources used
- relates to combinations of labour/land/capital
- & productivity of labour/materials usage
Effectiveness definition in use of resources?
- outputs obtained are in line with intended objs
What is involved in the Operational Control section of Antony’s ideology?
- assuring that specific tasks are carried out effectively & efficiently
- will occur in all aspects of organisation
- even in parts that can’t be fully planned such as repair & maintenance - still plan preventative maintenance
- internal
- required frequently
- detailed processing of raw data
Management Accounting Vs Financial Accounting Big Picture
use same source data
MA provide info for managers/internal use
FA ensure ass/lia properly accounted for, for external/SH use
Management Accounting Vs Financial Accounting Timeframe
MA used to aid plans/control so required at different time periods to help decisions
FA over defined period and at end of period
Management Accounting Vs Financial Accounting Legal
MA no legal requirements
FA by law Limited Liability companies
Management Accounting Vs Financial Accounting Format
MA at discretion of management how best will help decisions, will devise own format
FA defined by law/standards to allow easily comparable
Management Accounting Vs Financial Accounting Focus
MA specific areas, aiding decision
FA business as whole, aggregating revenues/costs, are end product
Management Accounting Vs Financial Accounting Scope
MA non-monetary measures & quality
FA only monetary nature
Management Accounting Vs Financial Accounting Past
MA historical record and future planning tool
FA historic picture of past operations
What does management accounting rely on as it is forward looking?
- guesses/approximations
- use reasonable approx
- means always level of uncertainty and should be incorporated
- if not taken into account it is unsuitable for decision making
- never be risk free
