Accounting Chapters 1, 2, And 6

Front 1

Accounting

Back 1

Collection of systems and processes used to record, report, and interpret business transactions

Front 2

Stewardship Function of Managers

Back 2

Businesses are entrusted to the care of managers

Front 3

Notion of Accountability

Back 3

Managers, through accounting, provide stakeholders with assurance that managers have acted in their best interest

Front 4

3 Functions of Accounting

Back 4

Scorekeeping
Attention directing
Problem solving

Front 5

Interrelated Functions of financial and management accountants

Back 5

Planning
Decision making
Control

Front 6

Role of Financial Accounting

Back 6

-Ensure financial transactions and reports are prepared in accordance with regulation
-Provide accountability to stakeholders
-Create equitable and fair basis for assessing business performance
-Mostly concerned with external reporting

Front 7

Does financial accounting look into the past or future?

Back 7

Past

Front 8

Role of Management Accounting

Back 8

-Focused on needs of internal users
-Not restricted by accounting principals or regulations

Front 9

Does management accounting look into the past or future?

Back 9

Future

Front 10

7 Trends in Management Accounting

Back 10

1. Value-based management
2. Non-financial performance measurement systems
3. Quality management
4. Environmental accounting
5. Activity based management
6. Strategic management accounting
7. Lean accounting

Front 11

Equity is...

Back 11

Shareholders investments

Front 12

Debt is...

Back 12

Borrowing from financiers

Front 13

Capital employed

Back 13

Both debt and equity in a business

Front 14

Cost of Capital

Back 14

Cost incurred by an organization to fund all of its investments

Front 15

Product Markets

Back 15

Companies invest in things in order to make, buy or sell products and services

Front 16

Value-based Management

Back 16

Shareholder value is the primary goal of every business

Front 17

Market Value added

Back 17

Measures value generated by managers for shareholders

Front 18

Shareholder Value added

Back 18

Refers to increase in shareholder value over time (focuses on short term gains)

Front 19

Economic Value added

Back 19

-Captures economic profit earned by a business that leads to shareholder value creation
-Considerate of long term

Front 20

3 Decisions influencing Value Drivers

Back 20

1. Operating
2. Investing
3. Financing

Front 21

Strategy

Back 21

-Influences and is influenced by shareholder control
-Reflected in marketing, HR, and operating

Front 22

Financial Management

Back 22

-Raising debt and equity
-Managing cost of capital

Front 23

Financial accounting

Back 23

Stewardship function

Front 24

Management accounting

Back 24

Info for planning, decision making, and control

Front 25

Legislation that governs federally registered companies

Back 25

Canada Business Corporations Act (CBCA)

Front 26

Legislation that governs provincially registered companies (BC)

Back 26

British Columbia Business Corporations Act (BCBCA)

Front 27

Canada Business Corporations Act (CBCA)

Back 27

-Sets out effects of incorporations (limited liability of shareholders for unpaid portions of shares)
-Sets out need for companies to have constitutions

Front 28

Corporate Governance

Back 28

System by which companies are directed and controlled

Front 29

2 Models of Corporate Governance

Back 29

Shareholder Value
Stakeholder Model

Front 30

Sarbanes-Oxley Act

Back 30

-Requires disclosure of all material off balance sheet transactions
-Requires certification of all financial reports be CEO and CFO in all US companies

Front 31

Emergence of corporate governance traced to

Back 31

- enforcement exercise in relation to past misdeeds
- Changing financial markets, including the rapid rise of institutional investors and their increasing desire to be more active investors
-Growth of pension savings in most countries and increased dependence of aging population on pension and savings

Front 32

6 Principles of Corporate Governance

Back 32

1. Manipulation of share prices
2. Roles and responsibilities of directors and their remuneration
3. Accountability and audit
4. Internal control
5. Disclosure of governance arrangements in annual reports
6. Obligations to its shareholders and others are understood and met

Front 33

Audit

Back 33

Periodic examination of the accounting records of a company carried out by an independent auditor

Front 34

Audit Committee

Back 34

Committee of board of directors which the board delegates, they are responsible for overseeing the financial reporting process

Front 35

3 Other forms of audit reports

Back 35

-review engagements
-agreed on procedures
-compilation reports

Front 36

Risk

Back 36

Uncertain future events which could influence achievement of organizations strategic, organizational, and financial objectives

Front 37

Internal Control

Back 37

The whole system of internal control (financial or other) to provide reasonable assurance of effective and efficient operation, internal financial control and compliance with legislation

Front 38

Management Control

Back 38

Process by which managers assure resources are obtained and used effectively and efficiently in the accomplishment of the organizations objectives

Front 39

Strategic Planning Process

Back 39

Mission statement
Internal/external review
Strategy development
Implementation of strategy
Management Control

Front 40

Management Control Systems

Back 40

strategic plans, long-range plans, annual operating budgets, periodic statistical reports, performance appraisals, and policies and procedures

Front 41

Feedforward

Back 41

Process of determining whether strategies are likely to achieve target results that are consistent with organizational goals

Front 42

Feedback

Back 42

Retrospective process of measuring performance, comparing it with the plan, and taking corrective action

Front 43

4 Elements of Control Systems

Back 43

1. Detector of sensor that measures whats happening
2. Assessor that determines the significance of what is happening by comparing it with a standard or expectation
3. An effector that alters behaviour if the assessor indicates the need to do so
4. Communication network that transmits information between the other elements

Front 44

3 Standards to Compare Performance Against

Back 44

1. Previous results
2. Results of other companies
3. Expected future performance

Front 45

Limitations of financial measures

Back 45

Lowers long term profitability of an organization

Front 46

Focusing on measuring intangibles can...

Back 46

Often provide the best indication of long term profitability and success

Front 47

Balanced Scorecard
4 Perspectives of Performance Measurement

Back 47

FLIC
Financial
Learning and growth
Internal
Customer

Front 48

Multidimensional Performance Measurement

Back 48

-Contrasts performance management to measurement
-Argues companies are too concerned with controlling when they could be building the business

Front 49

Enterprise Resource Planning

Back 49

Info system that supports strategic management process and aims to overcome difficulties of integrating info from diverse systems