FINANCIAL AND MANAGEMENT ACCOUNTING PART-II
Keywords:Balanced score card: An integrated performance measurement technique. Cost... Show more Balanced score card: An integrated performance measurement technique. Cost management system: A collection of tools and techniques for strategic management of cost. Value added: The increase in the realisable value of materials and services. Horizontal analysis: Comparison of the firm’s current year figures with the previous year’s figures. Trend analysis: Computation of trend ratios (trend percentages) for a series of years. Vertical analysis: Analysing the proportion of each component of the financial statement to its total. Adjusted P/L account: A memorandum account prepared to compute funds from operations. Fund: Net working capital. Flow of fund: Flow of value between current items to non-current items Financing activities: Activities that result in changes in the size and composition of the owners’ capital. Investing activities: Acquisition and disposal of long-term assets and other investments not included in cash equivalents. Operating activities: Principal revenue producing activities of the enterprise. Direct cost: Cost that is traceable with the final product or service. Indirect cost: Cost that is not traceable with the final product or service. Prime cost: Total of direct material, direct labour, and direct expenses. Method of costing: Process of determining the cost of a product or service Break-even point: The level of sales at which the total cost will be equal to the total sales. C/S ratio: The ratio of contribution to sales. CVP analysis: Study of inter relationship between cost, volume, and profit. Marginal cost: The cost of making an additional unit. Marginal costing: The technique of charging only variable costs to products. Avoidable (discretionary) costs: Costs that can be avoided in the future as a result of managerial choice. Irrelevant costs: Costs that are not affected by a decision or course of action. Opportunity costs: Monetary benefits foregone for not pursuing the alternative course. Relevant costs: Costs that would change as a result of the decision. Sunk costs: Historical costs that cannot be recovered in a given situation. Budget: Financial and/or quantitative statement prepared and approved prior to a definite period of time of the policy to be pursued during that period for the purpose of attaining a given objective. Budgeting: The process of preparing budgets Budgetary control: A technique of cost control that involves preparing, implementing, and monitoring of budgets. Analysis of variance: The process of analysing the difference between the actual cost and the standard cost and the reasons for the difference. Labour cost variances: Difference between the actual labour cost and the standard labour cost. Material cost variances: Difference between the actual material cost and the standard material cost. Standard cost: A predetermined cost. Gross working capital: It refers to the amounts invested in various components of current assets. Net working capital: It is the excess of current assets over current liabilities and provisions. Operating cycle: It is the time gap between acquisition of resources and collection of cash from customers. Working capital: It is the difference between current assets and current liabilities. Ordering costs: The expenses incurred to place orders with suppliers and replenish the inventory of raw materials Carrying costs: Costs incurred for maintaining the inventory in warehouses. Trade credit: The credit extended by the supplier of goods and services in the normal course of business transactions. Credit period: Refers to the length of time allowed to customers to pay for their purchases.
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