Chapter 1: Introduction to Management Accounting

Vocabulary flashcards covering fundamental definitions, comparison between management and financial accounting, process models, and functions from Chapter 1.

Accounting (AAA Definition)

The process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information, as defined by the American Accounting Association.

Internal Users

Users within an organization, such as management, who utilize management and cost accounting information to guide decision-making, planning, and control.

External Users

Parties outside the organization who rely on financial accounting reports to make decisions regarding the entity.

Financial Accounting

The branch of accounting that reports historical financial information describing the whole business to external parties, typically adhering to statutory requirements and regulations like IFRS.

Management Accounting

The branch of accounting that produces frequent financial and non-financial reports focusing on different parts of the business to assist internal users with planning, decision-making, and control.

The Decision-Making, Planning and Control Process

A six-stage process comprising: 1. Identify objectives, 2. Search for alternative courses of action, 3. Select appropriate courses of action, 4. Implement the decisions, 5. Compare actual and planned outcomes, and 6. Respond to divergencies from plan.

Planning Process

The sequence of stages in the decision-making model that involves identifying objectives, searching for alternative courses of action, selecting appropriate courses of action, and implementing decisions.

Control Process

The final stage in the management model that involves comparing actual and planned outcomes and responding to divergencies from the plan.

Changing Business Environment Drivers

Factors impacting management accounting practice, including global competition, changing product life cycles, manufacturing technology advances, information technology, environmental/sustainability issues, ethical standards, deregulation, value creation, and customer orientation.

Key Success Factors for Customer Satisfaction

Four core areas companies focus on to compete successfully: cost efficiency, quality control, time management, and innovation and continuous improvement.

Financial Reporting Function

A function of a cost and management accounting system that allocates costs between products sold, and fully and partly completed products that are unsold.

Decision Making Function

A function of a cost and management accounting system that provides relevant information to help managers make better decisions.

Performance Evaluation Function

A function of a cost and management accounting system that provides information for planning, control, performance measurement, and continuous improvement.