Principles of Management Accounting

These flashcards cover key concepts from the lecture on principles of management accounting, including definitions, core functions, differences between accounting types, cost classifications, budgeting techniques, break-even analysis, and variance analysis.

What is management accounting defined as?

The application of appropriate techniques and concepts in processing historical and projected economic data of an entity to assist management in establishing plans and making decisions.

What is the primary concern of management accounting?

Providing information to managers for internal use.

What is the scope of management accounting?

Financial accounting, cost accounting, tax accounting, auditing, office services, financial analysis, management reporting, forecasting, and budgeting.

List the functions of management performed by managers.

Planning, organizing and directing, controlling, and decision making.

What does a performance report compare?

Budgeted data to actual data for a specific time period.

What is the difference between management accounting and financial accounting?

Management accounting focuses on internal data for decision-making, while financial accounting focuses on external reporting.

What are the two classifications of costs in relation to behavior?

Fixed costs and variable costs.

What are product costs?

Costs involved in the purchase or manufacture of goods, classified as inventoriable costs until expensed.

Define opportunity costs.

The potential benefit or cost of the foregone alternative when a choice is made.

What is absorption costing?

A method where all manufacturing costs, both variable and fixed, are included in the cost of the product.

What are participative budgets?

Budgets created with active involvement from managers, enhancing commitment to achieve budgeted goals.

What is the break-even point (B.E.P)?

The sales volume at which revenues and total costs are equal, indicating the minimum level necessary to avoid losses.

What does variance analysis measure?

The difference between actual performance and planned or standard performance in terms of costs.

What are sunk costs?

Costs that have already been incurred and cannot be changed by any current or future decisions.

What is a zero-based budget?

A budgeting method where all expenses must be justified for each new period, starting from a zero base.

What is the purpose of a cash budget?

To plan for adequate cash balances and ensure liquidity for the business.