Accounting

 

FEEDBACK CONTROL:  Control processes and mechanism focused on explaining past performance.

 

FINANCIAL BUDGETS: The portions of the master budget that include the cash budget, the budgeted balance sheet, the budgeted statement of cash flows, and the capital budget.

 

FINANCIAL CONTROL:  A process effected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization's resources are directed, monitored, and measured. It plays an important role in preventing and detecting fraud and protecting the organization's resources, both physical (e.g., machinery and property) and intangible (e.g., reputation or intellectual property such as trademarks). At the organizational level, internal control objectives relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations. The implementation of well-designed cost control systems can help management to monitor the financial implications of production. Profit is equal to sales minus costs, and as costs are generated by the firm itself, it is important to control them. Every 1 pound sterling saved in costs adds another 1 pound sterling to profits.  

 

FIXED COST: Costs that, in total, are constant within the relevant range as the activity output varies.

 

FLEXIBLE BUDGET: A budget that can specify costs for a range of activity. 
 
INDIRECT COSTS: Costs that cannot be traced to a cost object. 
These are also known as Overhead Costs and are all those costs incurred in the organization which cannot objectively be allocated to specific output, e.g. rent, insurance, supervision etc.

  
INVENTORY: The money an organization spends in turning raw materials into throughput.

 

JOB-ORDER COSTING: A costing system in which costs are collected and assigned to units of production for each individual job. 

LONG RUN: A period of time in which all costs are variable.

 

MANAGEMENT ACCOUNTING:  Accounts and reports are tailor made for the use of the managers and directors of a business (in any form they see fit - there are no rules) as opposed to financial accounts which are prepared for the Inland Revenue and any other parties not directly connected with the business.

 

MANAGEMENT BY EXCEPTION:  Practice whereby only the information that indicates a significant deviation of actual results from the budgeted or planned results is brought to the management's notice. Its objective is to facilitate management's focus on really important tactical and strategic tasks. In MBE, the decision that cannot be made at one level of management is passed on to the next higher level.

 
MANAGEMENT CONTROL: The process by which managers ensure that resources are obtained and used efficiently and effectively in accomplishing an organization's objectives.

 

MANAGEMENT CONTROL SYSTEMS: Structures, resources, and processes that facilitate effective management control.

 

MARGINAL COST: is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. If the good being produced is infinitely divisible, so the size of a marginal cost will change with volume, as a non-linear and non-proportional cost function includes the following: variable terms dependent to volume, constant terms independent to volume and occurring with the respective lot size, jump fix cost increase or decrease dependent to steps of volume increase.

 

MARKETING (SELLING) COSTS: The costs necessary to market and distribute a product or service.

 

MASTER BUDGET: The collection of all area and activity budgets representing a firm's comprehensive plan of action.

 
MIXED COST: A cost that has both a fixed and a variable component. 
 
OPERATING BUDGETS: Budgets associated with the income-producing activities of an organization.

 

OPERATING EXPENSES: The money an organization spends in turning inventories into throughout.

 

OPERATING INCOME: Revenues minus expenses from the firm's normal operations. Income taxes are excluded.

 

OPERATION COSTING: A hybrid costing method that assigns material costs to a product using a job-order approach and assigns conversion costs using a process approach.

 

OVERHEAD: All production costs other than direct materials and direct labor.

 

OVERHEAD BUDGET: A budget that reveals planned expenditures for all indirect manufacturing items.

 
PERFORMANCE: The measure of how consistent and well a product functions. 
 
PLANNING: Setting objectives and identifying methods of achieving those objectives. In organizations and public policy it is both the organizational process of creating and maintaining a plan; and the psychological process of thinking about the activities required to create a desired goal on some scale. A study of cost behavior with respect to output changes enables management to estimate the outcome of future production plans. This includes comparing product profitability and departmental performance.

 

PRICING:  The process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Costs provide one of the ingredients in the highly complex process of pricing finished goods. They may also be used for the valuation of raw materials and work-in-progress.

In organizations and public policy is both the organizational process of creating and maintaining a plan; and the psychological process of thinking about the activities required to create a desired goal on some scale.  

 
PROCESS-COSTING SYSTEM: A costing system that accumulates production costs by process or by department for a given period of time. 

PRODUCT COST: A cost assignment method that satisfies a well-specified managerial objective.

 

PRODUCT LIFE CYCLE: The time a product exists, from conception to abandonment. 

PRODUCTION BUDGET: A budget that shows how many units must be produced to meet sales needs and satisfy ending inventory requirements.

 
PRODUCTION COSTS: Costs associated with the manufacture of  goods or the provision of services.

 

PROFIT CENTRE: A responsibility centre in which a manager is responsible for both revenues and costs.

 

RATIO ANALYSIS: Single most important technique of financial analysis in which quantities are converted into ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or different industries. Ratio analysis determines trends and exposes strengths or weaknesses of a firm.

 

REVENUE CENTRE: A responsibility centre in which a manager is responsible only for sales.

 

SALES BUDGET: A budget that describes expected sales in units and dollars for the coming period.

 

SELLING PRICE: The market value, or agreed exchange value, that will purchase a definite quantity, weight, or other measure of a good or service.  

 

SEMI-VARIABLE COST: is an expense which contains both a fixed cost component and a variable cost component. The fixed cost element shall be a part of the cost that needs to be paid irrespective of the level of activity achieved by the entity. On the other hand the variable component of the cost is payable proportionate to the level of activity. It shows similarities to telephone bills. One must pay line rental and on top of that a price that depends on how heavy one is using the service. So it changes with output. Another example is satellite television. A price for the box must be paid monthly and to get additional movies, more money has to be given.

 

SHORT RUN: A period of time in which at least one cost is fixed. 

STANDARD COST PER UNIT: The per-unit cost that should be achieved given materials, labor, and overhead standards.

 

TARGET COSTING: A method of determining the cost of a product or service based on the price (target price) that customers are willing to pay.

 

THROUGHPUT:  In business, the rate at which an organization reaches a given goal. Throughput is generally viewed as the rate a business is able to produce a product or service for a given unit of time. Businesses with high throughput (output) levels are able to be more competitive than lower throughput firms because they are able to produce a given product or service more efficiently. The idea of throughput is part of the Theory of Constraints of business management. The guiding ideology of the Theory of Constraints is that a chain is only as strong as its weakest link. Advocates of the theory attempt to minimize how weak links affect a company's performance. Additionally, firms will often measure throughput using Little's Law, which states throughput is equal to units produced divided by time.

 

TRACING: Assigning costs to a cost object using an observable measure of the cost object's resource consumption.

 

UNFAVOURABLE (U) VARIANCES: Variances produced whenever the actual input amounts are greater than the budgeted or standard allowances.

 

UNIT COST: The total costs assigned to a product divided by the number of units produced of that product.

 

VALUE ADDED COSTS: Costs caused by value-added activities. 
 
VARIABLE COST: Costs that, in total, vary in direct proportion to changes in a cost driver.

 

VARIABLE COSTING: A product-costing method that assigns only variable manufacturing costs-direct materials, direct labor, and variable overhead-to production. Fixed overhead is treated as a period cost.

 

VARIANCE: A statistical measure of dispersion in a population. The variance is the square of the standard deviation. The standard deviation equals the square root of the arithmetic mean of the squares of deviations from the arithmetic mean.

 

VARIANCE ANALYSIS: Process aimed at computing variance between actual and budgeted or targeted levels of performance, and identification of their causes.