Management Accounting

Accounting
Accounting is the process of identifying, measuring, recording, and communicating economic transactions. Typically, this is done using monetary terms and involves the preparation of financial statements such as profit and loss accounts and balance sheets.
ACMA
ACMA stands for Associate of the Chartered Institute of Management Accountants, a designation demonstrating proficiency in management accounting and strategic governance.
Activity Ratio
An activity ratio is a key metric in management accounting that compares the actual production achieved during an accounting period with the production level deemed achievable for that period. It provides insights into the efficiency and productivity of an organization.
Activity-Based Costing (ABC)
Activity-Based Costing (ABC) is an accounting method of cost allocation that assigns costs to products and services based on the activities and resources that they consume.
Administration Cost Variance
Administration Cost Variance is the difference between the administration overheads budgeted for in an accounting period and those actually incurred. This variance helps in evaluating and controlling administrative costs in an organization.
Allocation Base
In management accounting, an allocation base is used to distribute costs to cost objects. A crucial component of both traditional costing systems and Activity-Based Costing (ABC), the allocation base plays a significant role in accurate cost allocation.
Balanced Scorecard (BSC)
An approach to management integrating both financial and non-financial performance measures into a comprehensive framework developed by Professors Kaplan and Norton.
Breakeven Analysis
Breakeven Analysis, also known as Cost-Volume-Profit (CVP) Analysis, is a managerial accounting technique in which costs are analyzed according to their fixed or variable nature and compared to sales revenue to determine the level of sales or production at which the business neither makes a profit nor incurs a loss.
Budget Planning
Budget planning is a critical managerial accounting function where future activities and operational plans of an organization are transformed into detailed budgets to forecast revenues, expenses, and financial goals.
Certified Management Accountant (CMA)
The Certified Management Accountant (CMA) is a professional certification awarded by the Institute of Management Accountants (IMA) to individuals who have demonstrated expertise in management accounting through education, examination, and experience.
Chartered Global Management Accountant (CGMA)
The Chartered Global Management Accountant (CGMA) designation is a globally recognized accounting credential that signifies expertise in management accounting and finance. It is awarded by both the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA).
Chartered Global Management Accountant (CGMA)
The Chartered Global Management Accountant (CGMA) is a distinguished professional designation for management accountants aimed at recognizing advanced skills and competencies in management accounting. It is available to members of the Chartered Institute of Management Accountants (CIMA) and the American Institute of Certified Public Accountants (AICPA) who meet specific experience requirements and pass a notable exam. The CGMA credential is governed by a joint venture between CIMA and AICPA.
Chartered Institute of Management Accountants (CIMA)
The Chartered Institute of Management Accountants (CIMA) is a professional association founded in 1919, primarily serving professionals working in industry and commerce. CIMA is renowned for its focus on management accounting.
CIMA (Chartered Institute of Management Accountants)
The Chartered Institute of Management Accountants (CIMA) is a leading professional body in the field of management accountancy. It provides support, education, and certification for accounting professionals globally, emphasizing the integration of accounting skills with strategic business management.
Contingency Theory of Management Accounting
The Contingency Theory of Management Accounting posits that there is no single universally acceptable management accounting system suitable for all organizations or consistently effective within an organization across all situations. Instead, accounting systems must adapt to prevailing circumstances, such as shifts in the environment, competition, organizational structures, and technology.
Cost Accounting
The techniques used in collecting, processing, and presenting financial and quantitative data within an organization to ascertain the cost of cost centres and cost units and the various operations.
Cost Item
A cost item refers to a category of costs incurred by an organization that are similar in nature. These costs are collected together both for reporting purposes and because they can be subjected to similar treatment by the costing system. Examples include rent, consumable materials, and sundry selling expenses.
Cost Sheet
A cost sheet is a form used in costing to collect and present all the costs associated with a service, product, process, or cost center, often for management analysis or use in a costing system.
Costing Methods
Techniques and procedures in cost accounting and management accounting to obtain the costs of services, products, processes, and cost centers for decision making, planning, and control.
Costing Principles
Costing principles are the fundamental guidelines that direct how costs are recorded and reported in management accounting, ensuring that financial data is accurate and useful for decision making.
Customer Profitability Analysis (CPA)
Customer Profitability Analysis (CPA) evaluates the profitability of each customer or segment to help businesses focus on value-adding customers and optimize resource allocation.
Different Costs for Different Purposes
In management accounting, the principle that the management of an organization is likely to need different information, and thus different costs, for various activities it carries out, especially when making decisions.
Direct Labour Rate of Pay Variance
In a standard costing system, a variance arising as part of the direct labour total cost variance. It compares the actual rate paid to direct labour for an activity with the standard rate of pay allowed for that activity for the actual hours worked. The resultant adverse or favourable variance is the amount by which the budgeted profit is affected by differences in direct labour rates of pay.
Divisional Performance Measurement
Divisional performance measurement is a structured approach that allows the central management of an organization to assess the performance of its individual divisions. This is essential in a divisionalized structure to ensure each division is contributing effectively to the organization's overall goals. Common methods include Return on Capital Employed (ROCE), Residual Income (RI), and the profit-to-sales ratio.
Fellow of the Chartered Institute of Management Accountants (FCMA)
FCMA stands for Fellow of the Chartered Institute of Management Accountants, a prestigious designation awarded to members with significant experience and achievements in management accounting and finance.
Finished Goods Stocks Budget
A budget that outlines in both financial and quantitative terms the planned levels of finished goods at various points during the budget period.
Fixed Overhead Expenditure Variance
Fixed Overhead Expenditure Variance in standard costing refers to the difference between the fixed overhead budgeted and the actual fixed overhead incurred.
IMA: Institute of Management Accountants
The Institute of Management Accountants (IMA) is a global association of accounting and finance professionals, focused on empowering professionals in roles of management accounting and financial management.
Imputed Cost
A cost not actually incurred by an organization but introduced into management accounting records to ensure comparability of costs among different operations.
Institute of Management Accountants (IMA)
The Institute of Management Accountants (IMA) is a professional organization focused on advancing management accounting and finance, recognized globally for its certifications and educational resources.
Management Accounting
Management accounting involves techniques used to collect, process, and present financial and quantitative data within an organization to aid in performance measurement, cost control, planning, pricing, and decision making. The Chartered Institute of Management Accountants (CIMA) is the major professional body for management accountants in the UK.
Marginal Cost
Marginal cost represents the cost of producing one additional unit of a product. It includes both direct costs and variable overhead costs associated with the production process.
Non-Controllable Costs
Non-controllable costs, also known as uncontrollable costs, refer to expenses that cannot be influenced or managed by individual managers or departments within an organization.
Operational Variance
A detailed analysis of operational variance within the framework of standard costing, highlighting how it accounts for the difference between adjusted current standards and actual performance.
Performance Measurement
Performance measurement involves developing indicators to assess progress towards predefined goals and reviewing performance against these measures. It can be applied to an entire organization or specific departments, branches, or individuals, utilizing both financial and non-financial measures.
Pricing
Understanding the different methodologies for setting selling prices for products and services supplied by an organization.
Prime Documents in Accounting
Prime documents are the foundational elements used to initiate and record accounting entries in both accounting and management accounting systems. They include documents such as sales invoices, materials requisitions, materials returns notes, and direct charge vouchers.
Principal Budget Factor (Limiting Factor)
The principal budget factor, also known as the limiting factor or constraint, refers to the element or resource that imposes a limitation on the organization’s budgeting process and overall production capabilities.
Profit-Volume Ratio (PV Ratio)
A metric used to measure the relationship between profit and sales volume, commonly referred to as the Contribution Margin Ratio, which indicates how much revenue from sales contributes to covering the fixed costs and generating profit.
Relevant Revenue
Relevant revenue refers to the income generated from operations that are directly related to the core activities of a business. This figure is crucial for management to assess profitability and make informed financial decisions.
Responsibility Accounting
A system in management accounting designed to provide information to all levels of an organization, based on the responsibility of individual managers for specific items of expenditure or income.
Rolling Budget
A rolling budget, also known as a continuous budget, is a financial planning method that is regularly updated by adding a further budget period, such as a month or a quarter, while concurrently excluding the earliest month or quarter.
Scorekeeping
Scorekeeping is a crucial aspect of management accounting where the performance of managers and operators is monitored, recorded, and reported to relevant levels of management for evaluation and decision-making.
Segmental Reporting
Segmental reporting entails the disclosure in annual accounts and reports of financial results of major operating and geographic segments within a diversified group of companies. This practice offers investors insight into the profitability, risk, and growth prospects for individual segments of a business.
Standard Overhead Cost
A standard cost for the fixed and/or variable overhead of an operation derived from the standard time allowed for the performance of the operation or the production of a product and the standard overhead absorption rate per unit of time for that operation or product.
Standard Purchase Price
Understand the concept of Standard Purchase Price, a predetermined price set for each commodity of direct material for a specified period, used in a system of standard costing.
Standard Selling Price
A predetermined selling price set for each product sold for a specified period. These prices are compared with the actual prices obtained during the period in order to establish sales margin price variances in a system of standard costing.
Static Budget
A static budget is a type of budget that remains unaltered even as the activity levels or revenue and expense volumes change throughout the budget period. It is commonly used for fixed costs and for assessing management performance.
Sunk Costs
Sunk costs are previous expenditures that cannot be recovered and are typically irrelevant to future decision-making.
Throughput Accounting
Throughput accounting is an approach to short-term decision-making in manufacturing that treats all conversion costs as fixed and ranks products based on a throughput accounting ratio (TAR), particularly useful when a constraint or scarce resource exists.
Uncontrollable Costs
Uncontrollable costs are expenses that cannot be directly managed or influenced by a specific level of management within an organization. These costs are important for accurate performance measurement and often lead to differing opinions on their classification.
Variable Overhead Total Variance
In a system of standard costing, the total difference arising between the standard variable overhead absorbed for the actual units produced and the actual variable overhead expenditure incurred. See also Overhead Total Variance.

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