Management Accounting in Organisations Lecture Review

Flashcards to help review key concepts from the Management Accounting in Organisations lecture notes.

What is the definition of Management Accounting according to CIMA?

It is the application of accounting principles to create, protect, preserve and increase value for shareholders and stakeholders.

What are the main differences between Management Accounting and Financial Accounting?

Management accounting focuses on internal management needs and future relevance, while financial accounting focuses on external reporting and historical data.

What is a cost object?

A cost object is anything for which a separate cost measurement is required, such as a product, service, or project.

What are the five broad purposes of accounting systems?

1) Meeting regulatory requirements, 2) Formulating strategies, 3) Resource allocation, 4) Cost planning and control, 5) Performance measurement.

What does 'cost behaviour' refer to in management accounting?

Cost behaviour refers to how costs change in relation to changes in the level of activity or volume.

What is meant by Fixed costs?

Fixed costs do not change in total for a given time period, regardless of changes in activity levels.

What is a Performance Report?

A report comparing actual results with budgeted amounts, showing variances.

What is the purpose of cost allocation?

Cost allocation is the process of assigning indirect costs to a cost object.

What are direct costs?

Direct costs can be traced to a specific cost object in an economically feasible way.

What should managers consider when using unit costs for decision making?

Unit costs must be interpreted with caution as they can lead to overestimations or underestimations of actual total costs depending on the production volume.