Management Accounting Reviewer - Chapter 1

Vocabulary flashcards based on lecture notes regarding the scope of management accounting, controller versus treasurer roles, and management functions.

Management by Objectives

A procedure in which a subordinate and a supervisor agree on goals and methods of achieving them and develop a plan in accordance with that agreement, followed by evaluation at the end of the period.

Management by Exception

A technique of highlighting those which vary significantly from plans and standards based on the principle that executive time should be spent on non-routine items identified as top priority.

Line function

The authority to command or give orders to subordinates, exercising direct downward authority over line departments and direct involvement in the provision of goods and services.

Staff function

The authority to advise but not to command others; it involves providing managers with specialized service and technical advice for support, exercised laterally or upward.

Controllership

The process by which management assures itself that company resources are obtained and utilized according to plans that are in line with the company's SET OBJECTIVES; the practice of the established science of control.

Controller

The chief management accounting executive of a business enterprise, often referred to as the chief accountant, responsible for accounting aspects of management control including financial accounting, tax reporting, and cost accounting.

Treasurer

The officer responsible for raising capital, safeguarding the organization's assets, management of investments, credit policy, and insurance coverage; primarily concerned with the CUSTODY of funds.

Internal auditor

The person responsible for reviewing accounting procedures, records, and reports in both the controller's and treasurer's areas, and expressing an opinion to top management on the accounting system's effectiveness.

Planning

A major management activity that involves establishing a basic strategy, selecting a course of action, specifying how the action will be implemented, and setting objectives.

Directing and Motivating

A management activity involving mobilizing people to carry out plans, running routine operations, taking action to implement the plan, and motivating others to achieve results.

Controlling

A management activity involving ensuring the plan is carried out, comparing actual performance with set plans or standards, and deciding what corrective actions to take should deviations occur.

Financial Accounting

A type of accounting primarily for external users (investors/creditors), which is mandatory, uses GAAP, is mainly historical, and focuses on the business as a whole.

Managerial Accounting

An discretionary type of accounting exclusively for internal users (managers/employees), which is future-oriented, focus on extensive detail, and has no unifying model or equation.

Generally Accepted Accounting Principles (GAAP)

The guiding principles required for Financial Accounting, but not strictly required for Managerial Accounting which relies on what management wants and needs.

Financial Accounting Unifying Model

$$\text{Assets} = \text{Liabilities} + \text{Equity}$$