Unit 1 Slides (1) Flashcards
What is accounting concerned with?
Providing information that helps decision-makers to make good decisions
What is the definition of accounting?
The process of identifying, measuring & communicating financial and non-financial information about an entity to permit informed judgments and decisions
What are the major purposes of accounting?
Formulating overall strategies, resource allocation decisions, cost planning & control, performance measurement, and meeting external regulatory reporting requirements.
Who are the internal users of accounting information?
Managers
Who are the external users of accounting information?
Shareholders, creditors, and regulatory agencies
What does management accounting focus on?
Provision of information to people within the organisation to help them make better decisions
What does financial accounting focus on?
Provision of information to external parties outside the organisation
What is a key difference between management accounting and financial accounting regarding legal requirements?
Financial accounting has a statutory requirement for public companies to produce annual financial accounts; management accounting is optional.
How does management accounting differ in focus compared to financial accounting?
Management accounting focuses on small parts of the organization, while financial accounting reports on the whole business.
Are management accountants required to adhere to generally accepted accounting principles?
No, they are not required to adhere to these principles when providing managerial information for internal purposes.
What is the time dimension difference between management accounting and financial accounting?
Financial accounting reports on past performance, while management accounting is concerned with future information.
What is the frequency of reporting in management accounting compared to financial accounting?
Management accounting reports can be prepared daily, weekly, or monthly; financial accounting reports are typically published annually.
What is the main purpose of cost accounting?
Measures & reports financial and non-financial information related to the organization’s acquisition or consumption of resources.
What are the three functions of management accounting?
- Scorekeeping
- Attention Directing
- Problem Solving
What does scorekeeping refer to in management accounting?
Accumulation of data and reporting of reliable results to all levels of management.
What is the role of attention directing in management accounting?
Identifying and focusing management’s attention on critical areas that require action to improve organizational performance.
What does problem solving in management accounting entail?
Analysis undertaken to identify the best alternatives in relation to the organization’s goals.
What is a relevant cost?
A future cost that will be affected by a particular decision or course of action.
What are irrelevant costs?
Costs that are not affected by the decision in the future.
What is a sunk cost?
A historic cost that is not affected by the decision in the future.
What are the six steps in the decision-making process?
- Identify objectives
- Search for alternative courses of action
- Select appropriate courses of action
- Implement the decisions
- Compare actual & planned outcomes
- Respond to divergences from plan
What is the difference between planning and control processes in decision-making?
Planning involves making choices between alternatives; control measures actual performance to ensure chosen plans are carried out.
What is meant by ‘scorekeeping’ in management accounting?
The process of accumulating data and reporting reliable results to management.
Fill in the blank: A relevant revenue is a future revenue that will be ______ by a particular decision or course of action.
affected
