Exam 1 Man. Acc. (1, 12, 2, 3)

Managerial Accounting

Internal decision-making accounting that is detailed and does not follow GAAP.

Financial Accounting

External decision-making accounting that summarizes information into financial statements and adheres to GAAP.

Functions of Management

Includes planning, directing, controlling, and decision making.

Planning

Setting goals and objectives requiring extensive information.

Directing

Managing day-to-day operations of the organization.

Controlling

Evaluating the results of operations against plans.

Decision Making

Occurs at all stages of planning, directing, and controlling.

Types of Info Needed

Includes inputs (data) and outputs (results) for operational and upper-level managers.

Operational Managers

Require current, frequent information for immediate decisions.

Upper Level Managers

Require summarized, less frequent information for long-term goals.

Product Costing

Finding the true cost of products including materials, labor, and overhead.

Non-Routine Decision Making

Involves significant decisions like launching a new product line.

Structured Data

Data that is easy to process and use, such as an Excel file.

Unstructured Data

Data that is hard to capture and not standardized, such as social media comments.

Descriptive Analysis

Summarizes past trends to understand what happened.

Diagnostic Analysis

Analyses the reasons behind past events using financial and non-financial data.

Predictive Analysis

Uses descriptive and diagnostic analysis to forecast future events.

Prescriptive Analysis

Determines potential future actions using algorithms and modeling.

Code of Ethics

Guidelines for professional conduct including competence, confidentiality, integrity, and credibility.

Competence

Maintaining technical expertise and adhering to guidelines. *Any violation of the other three violates competence

Confidentiality

Keeping company information secret from outside parties.

Integrity

Being honest and trustworthy in all business dealings.

Credibility

Presenting information fairly and without bias, avoiding conflicts of interest.

Financial Data Analysis

Analyzing financial data year-to-year, against competitors, or against industry averages.

Horizontal Analysis

Year to year. Difference in dollar amounts between current and base year. Divide this by dollar amount of base year.

Vertical Analysis

Compares financial statement lines to base amounts, expressed as a percentage. The difference between account and base amount, divided by base,

Liquidity Ratios

Ratios that assess an organization’s ability to meet short-term obligations.

Working Capital

Current assets minus current liabilities.

Current Ratio

Current assets divided by current liabilities.

Quick Ratio

(Cash + Short-term investments + Net receivables) divided by current liabilities.

Return on Sales

Net income divided by net sales.

Return on Total Assets

Net income plus interest expense divided by average total assets.

Return on Equity

(Net income - preferred dividends) divided by average common stockholders equity.

Earnings Per Share

(Net income - preferred dividends) divided by average number of common shares outstanding.

Service Organization

Organizations that provide services, such as CPA and healthcare companies.

Merchandising Organization

Organizations that resell goods purchased from manufacturers.

Manufacturing Organization

Organizations that convert raw materials into finished products.

Prime Costs

Direct materials plus direct labor costs.

Direct Costs

Costs that can be traced directly to a cost object.

Direct Materials

Raw materials involved directly in the production of goods.

Direct Labor

Labor directly involved in producing goods.

Conversion Costs

Costs incurred to convert direct materials into products. Direct labor plus overhead.

Indirect Costs

Costs that cannot be traced directly to a cost object.

Overhead

Indirect costs such as indirect materials, labor, and factory utilities.

Value Chain

Includes research and development, design, production, marketing, distribution, and customer service.

Product Costs

Costs assigned to goods used to produce products and considered assets.

Period Costs

Costs not associated with manufacturing, including all value chain activities except production.

Cost Flow

The process of tracking the flow of costs through various inventory accounts.

Cost of Goods Sold

Sales minus COGS, resulting in Gross Profit.

Process Costing

Costing method for products that are similar and costs are averaged.

Job Costing

Costing method for specific jobs or products.

Job Sheet

Document used to track direct materials, labor, and overhead for a job.

Predetermined Overhead Rate

Estimated overhead divided by the estimated allocation base.

Allocated Indirect Cost

Calculated as predetermined overhead rate times actual allocation base.

Spoilage

Product that does not meet standards and is discarded or reworked.

Scrap

Leftover materials from manufacturing that hold no value.

Rework

Spoilage that has been fixed and incurs additional costs.