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Managerial Accounting Flashcards questions with actual answers.
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Managerial Accounting Flashcardsquestions with actual answers.
Accounting ANS - the process of keeping the financial score for the entity
relevant cost: ANS - the cost that differs between two alternatives
sunk cost: ANS - cash already spent; irrelevant to decision making because cash does not exist, does
not effect anything we do
break even is when revenue equals ANS - cost
differential analysis: ANS - analyzing the difference between two alternatives.
Traceable Fixed Cost ANS - A fixed cost that is able to be traced back to some sort of cost object or
business segment
Common Fixed Cost ANS - A cost that cannot be traced back to a cost object or business segment.
relevant range: ANS - range in which costs are linear
market price: ANS - price paid by willing buyer/seller
Pricing ANS - company needs to produce and get an adequate return
cost plus pricing ANS - price is a markup on the cost (cost base + markup %)
Variable cost pricing does not cover FC, ANS - makes contribution to FC
,importance of transfer pricing: ANS - allows manipulation and moving of profits to low tax
environments.
Financial Accounting vs Managerial Accounting ANS - Financial: external users of financial statements;
follow GAAP
Managerial: internal users; no GAAP
The Rule Makers ANS - SEC: Securities and Exchange Commission
IRS: Internal Revenue Service
FASB: Financial Accounting Standards Board
GAAS: Generally Accepted Auditing Standards
GAAP: Generally Accepted Accounting Principles
CPA: Certified Public Accountant
AICPA: American Institute of Certified Public Accountants
Controller: ANS - typically the top accounting person in a company
The Security and Exchange Act of 1934 ANS - created the Securities and Exchange Commission (SEC)
authorized the SEC to set accounting rules
SEC delegated the rule to a private non-profit industry group
(now) FASB - Financial Accounting Standards Board
Entity ANS - organizational element about which accounting information is collected
all costs are ANS - historical
Objectivity ANS - arm's length negotiation: arm's length transaction is to ensure that both parties in the
deal are acting in their own self interest and are not subject to any pressure or duress from the other
party. both parties are on equal footing.
, Going Concern ANS - company will be around long enough to use up assets and pay all liabilities
Revenue Recognition ANS - Earned: rendered goods and services
Recognized: expectation of payment
Matching: ANS - match expenses with revenue in the period they occur
Consistency: ANS - follow the same procedures each accounting period so can compare financial
statements
Conservatism: ANS - if multiple options exist, pick the least favorable
Materiality ANS - if you knew the fact, it could change your mind; 5% of something
Full Disclosure: ANS - "Full Monty" must disclose all relevant information
Assets: ANS - something of future economic value
Are all assets shown on the balance sheet? Not all assets are on the balance sheet because some can not
be objectively quantified.
Liability: ANS - something owed, not always on the balance sheet because they cannot always be
quantified (such as product liability) contingent liabilities can also not be estimated. (A contingent
liability is a potential liability...it depends on a future event occurring or not occurring.)
Stockholder's Equity: ANS - capital plus retained earnings
Capital: ANS - investment by the stockholders
Retained Earnings: ANS - Earnings retained in the business
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