Financial and Management Accounting Concepts

These flashcards cover key concepts in financial and management accounting, helping to prepare for an exam on the differences and functions of various accounting practices.

Financial Accounting

Accounting focused on external users like investors, creditors, and regulators, producing financial statements following GAAP.

Management Accounting

Accounting aimed at internal users, providing tailored reports for decision-making and operational management.

GAAP

Generally Accepted Accounting Principles, the framework for financial reporting.

Contribution Margin

The amount remaining from sales revenue after variable costs have been subtracted.

Break-even Analysis

The calculation to determine the sales necessary to cover total costs.

Fixed Costs

Costs that do not change with production volume.

Variable Costs

Costs that change directly with the level of production or sales volume.

Target Profit

The specific amount of profit a company aims to achieve over a certain period.

Cost-volume-profit Analysis

Analysis that examines how changes in costs and volume affect a company’s operating income and net income.

Relevant Range

The range of activity within which the assumptions about variable and fixed costs are valid.

Service Organization

A business that earns revenue by providing intangible products.

Merchandising Organization

A business that purchases finished products and resells them to consumers.

Manufacturing Organization

A business that produces finished goods using raw materials and labor.

Operating Budgets

Budgets that establish goals for the company's sales and production personnel.

Financial Budgets

Budgets focusing on the cash resources needed to fund expected operations and capital expenditures.

Master Budget

A comprehensive financial plan for the organization, consisting of interrelated budgets.

Static Budget

A budget that remains unchanged regardless of changes in activity level.

Flexible Budget

A budget that adjusts based on the actual level of activity.

Responsibility Accounting

The accounting system focused on reporting revenues and costs related to specific management responsibilities.

Decentralized Control

A management structure where control of operations is delegated to multiple managers.

Cost Centre

A department that does not generate direct profits but incurs costs.

Profit Centre

A department responsible for generating revenue and controlling costs.

Investment Centre

A branch of a company responsible for profits and the investment of assets.

Return on Investment (ROI)

A measure of how effectively managers use assets to generate earnings.

Controllable Margin

The amount of profit that a manager can directly impact through their decisions.

Residual Income

Income earned above a minimum required return on investment.

Environmental Social Governance (ESG)

A framework for assessing the sustainability and societal impact of investments.

Sustainability

Development that meets present needs without compromising future generations' ability to meet their own needs.

Carbon Footprint

The total greenhouse gas emissions caused by an individual, event, organization, or product.

Circular Economy

An economic system aimed at eliminating waste and the continual use of resources.

UN Sustainable Development Goals

A universal call to action to end poverty, protect the planet, and ensure prosperity for all.

Task Force on Climate-related Financial Disclosures (TCFD)

An organization that develops recommendations for more effective climate-related disclosures.

Sustainable Accounting Standards Board (SASB)

An organization that establishes standards for sustainability disclosures by public companies.

Scope 1 Emissions

Direct greenhouse gas emissions from owned or controlled sources.

Scope 2 Emissions

Indirect greenhouse gas emissions from the generation of purchased electricity.

Scope 3 Emissions

All other indirect emissions that occur in a company’s value chain.

Waste Management

The collection, transport, processing, and disposal of waste materials.

Climate Change

Significant and lasting changes in the Earth's climate.

Stakeholders

Individuals or groups that have an interest in the success and progression of a company.

Financial Reporting

The process of presenting financial information to the stakeholders.

Contribution Margin Ratio

The contribution margin expressed as a percentage of total sales.

Schedule of Cost of Goods Manufactured

A report detailing the total cost of producing goods during a specific period.

Budget Variance

The difference between budgeted and actual figures.

Feedback Loop

A system where outputs are circled back and used as inputs for future action.

Audit Trail

A step-by-step record by which accounting data can be traced to their source.

Internal Controls

Processes designed to provide reasonable assurance regarding the achievement of operational, reporting, and compliance objectives.