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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.
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