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38 Cards in this Set
- Front
- Back
What are the characteristics of Financial and Management Accounting
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1) Accouting is a service function and not an end in itself
2) Accounting deals with economic information and avoids occuerences of events or happenigs which cannot be quantified (management AC is not really worried about translating these quantities into money terms) 3) Accounting is a communication device |
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Whats the difference between management accounting and financial accounting
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financial accounting reports on management
management accounting reports for management |
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What does a manager do
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1) Plans and Coordinates
2) Directs and controls |
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What does a manager do in planning role
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1) Develops objectives for his function
2) Considers best way for these objectives to be reached 3) works out costs and revenues associated with each alternative 4) Selects favorite alternative and commences operations |
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What does a manager do in controlling role
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1) Checks actual performance against planned
2) takes remedial steps to resolve problems |
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Under what headings can we compare MA and FA
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1) Structure
2) Rules 3) Compulsory 4) Money Terms 5) Whole or parts 6) Audit 5) Time Span |
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Whats the difference between MA and FA under the heading "Structure"
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MA - No formal structure
FA - structured around accounting equation |
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Whats the difference between MA and FA under the heading "Rules"
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MA - No externally imposed rules
FA - uses the GAAP |
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Whats the difference between MA and FA under the heading "Compulsory"
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MA - No, but companies need to be able to understand there internal systems
FA - companies required by law to produce external accounts |
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Whats the difference between MA and FA under the heading "Money Terms"
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MA - can use money but not exclusively (labor hours etc)
FA - exclusively in money terms |
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Whats the difference between MA and FA under the heading "Time Span"
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MA- information tends to be future orientated
FA - records and reports past events based on GAAP |
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Whats the difference between MA and FA under the heading "Whole or parts"
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MA- is fragmented by nature, depends on what management need
FA- reports on the whole company |
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Whats the difference between MA and FA under the heading "Audit"
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MA- No, but external auditors may what to test internal controls by examining the accounting system
FA- Yes, companies must produce accounts and are required to have them audited |
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Why are costs so important
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costs are the fundamental control mechanism in a management information system
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What must you always doing when talking about costs
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Costs should always be accompanied by its adjective...or it is meaning less
Fixed costs Variable costs semi-variable etc |
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What are prime costs of a unit
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Direct Materials + Direct Labor
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What are manufacturing costs of a unit
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Prime costs + manufacturing overheads
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What is the total costs of a unit
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Prime costs + manufacturing overheads + non-manufacturing overheads
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What are manufacturing overheads
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depreciation of machinery, supervisors wages, energy costs etc
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What are non-manufacturing overheads
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dep of office equipment, computers office staff, selling and admin etc
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define variable cost
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varies directly with volume of production
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Is labor a variable cost
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in short term no, in long term yes because you can decide to lay people off
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What are fixed costs
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they do not vary with level of output
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When do fixed cost become variable in nature
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When you unitize them
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What are direct costs
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cost related directly to the production of the item (materials, labor)
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What are indirect cost
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manufacturing and non-manufacturing overhead
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What are traceable and common cost
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Traceable costs can be related directly to the production of the item
Common costs are indirect costs which is incurred by the business to support all production |
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What are standard costs
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cost which are budgeted, based on benchmarks and recent experience
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What are actual costs
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are the cost actual incurred and are measured period to period (variance between standard and actual needs explanation)
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Define break-even point
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It the point where if the business sold all its units made, total costs (fixed and variable) would equal revenue
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Define margin of safety
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the difference between the break-even point and the actual output achieved, if greater then break-even point
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Define Profit/Volume Ratio
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The P/V ratio indicated the amount of profit available to cover fixed costs
i.e if P/V ratio = 0.4 then for every $1 made 0.40 can be used to cover the fixed costs |
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How is P/V ratio calculated
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P/V = Sales price - variable costs/sales price
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Define contribution margin
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Contribution margin = Sales revenue - variable costs
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What is one of the most important things to look out for in A/C exam
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Total costs and unit costs.
Fixed costs will be based on an allocation key |
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How do you calculate the break-even point
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Fixed costs/contribution margin
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If you need a certain level of profit how would you calculate sale required
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Fixed costs + target profit required/contribution margin
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What are the assumption underpinning cost-volume-profit analysis
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1) All cost can be identified as variable and fixed
2) sale price per unit remain unchanged 3) Sales mix is held precisely as budgeted 4) All production is sold |