Accounting Study Guide 16 24 Essay

Accounting Exam # 2: Chapters 15, 16, 20, 22, 23, 24
Chapter 15:
Management Acc. vs. Financial Acc.
TABLE15-1 Comparison of Management Accounting and Financial Accounting
Areas of Comparison
Management Accounting
Financial Accounting
Primary users
Managers, employees, supply-chain partners
Owners or stockholders, lenders, customers, governmental agencies
Report format
Flexible, driven by user's needs
Based on generally accepted accounting principles
Purpose of reports
Provide information for planning, control, performance measurement, and decision making
Report on past performance
Nature of information
Objective and verifiable for decision making; more subjective for planning (relies on estimates); confidential and private
Objective and verifiable; publicly available
Units of measure
Monetary at historical or current market or projected values; physical measures of time or number of objects
Monetary at historical and current market values
Frequency of reports
Prepared as needed; may or may not be on a periodic basis
Prepared on a periodic basis

The Management process: Plan -> Perform –> Evaluate -> Communicate *TEST QUESTION KNOW 1 TO DEFINE*
1) Plan – Formulate Mission Statement, Set strategic, tactical, operating performance objectives, Select best product cost measurement method, Classify and budget Costs
2) Perform – Manage Ethically, Manage Supply Chain Relationships, Flow Product-Related Costs through the inventory accounts, Computer the Unit cost of a product or service
3) Evaluate – Compare actual performance with performance levels established in planning stage
4) Communicate – Prepare business plan, Communicate Information clearly and ethically, Prepare external reports, Prepare internal reports to monitor and control costs
Value Chain: Each step in the making of a product or the delivery of a service can be thought of as a link in a chain that adds value to the product or service.
Advantages: An advantage of value chain analysis is that it allows a company to focus on its core competencies. A core competency is the thing that a company does best. It is what gives a company an advantage over its competitors. Another benefit of the value chain is Outsourcing.
Continuous Improvement: The management concept that one should never be satisfied with the way things are. One should always seek a better method, product, process, or resource. Include: JIT, TQM, ABM
Just-In-Time: Reduces or eliminates wasted time, resources and/or space
Total Quality Management reduces or eliminates wasted resources caused by defects, poor mats, and wasted time
Activity Based Management identifies constraints and manages resources to overcome them
Each can be used individually, Can be combined to create a new operating environment, Are applicable to service, manufacturing and retail, All contribute toward the same results in any organization:
Reduce costs and delivery time
Improve quality
Increase customer satisfaction
Chapter 16/20:

Direct Costs: costs that can be conveniently and economically traced to a cost object
Indirect Costs: costs that cannot be conveniently and economically traced to a cost object
Product (inventorial) costs: Costs assigned to inventory. They appear on the B/S as Inventory and COGS on the I/S; (i.e. DM, DL, O/H)
Period (non inventorial) costs: Costs of resources used that are not assigned to products. They appear on the I/S as operating expenses (i.e. selling expenses, administrative expenses, etc)

Statement of Cost of Goods Manufactured:

Cost Volume Profit Equation: Sales – VC – FC = Profit ,
CVP Analysis: An examination of the cost behavior patterns that underlie the relationships among cost, volume of output, and profit
Chapter 22/24:
Responsibility Accounting: An information system that classifies data according to areas of responsibility and reports each area’s activities by including only the revenue, cost and resource categories that the assigned manager can control, Ensures managers won’t

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