Skip navigation.
Home

lev_lafayette's blog

Topic Ten: Managerial Decision Making

Cost-volume-profit (CVP) analysis involves studying the interrelationships between; the prices of products, the volume or level of activity, variable costs per unit, total fixed costs and the mix of products sold. Cost-volume-profit analysis is a key factor in many decisions, including choice of product
lines, pricing of products, marketing strategy and use of production facilities. Let us now examine the various types of cost-volume-profit analyses that are available.

Topic Nine: Performance Measurement Considerations

Performance measures are metrics that monitor our effectiveness in performing an activity and our efficiency in using resources. Efficiency is the attainment of maximum output with minimum resources. Improved efficiency is achieved if fewer inputs are used to produce a given amount of output, or a given level of input leads to increased output. Effectiveness is concerned with ensuring that the output from any given activity is achieving the desired
results.

Topic Eight: Budgeting and Capital Investment

Nearly everyone budgets to some extent, even though some people may not recognise what they are doing as budgeting. They estimate income, plan expenditures and restrict spending in accordance with the plan. They use estimates of income and expenditures to predict their future financial condition. Whilst such budgets may exist only in the mind of the individual, they are budgets nonetheless.

Costing Systems and Cost Control

We start this topic with an introduction to the process of assigning costs to individual products to determine total product cost. We then discuss the two 'traditional' absorption costing systems—job costing and process costing - before looking at two other systems ncreasingly being adopted: just-in-time and activity-based costing. We will also briefly discuss the nature of the variable costing method and its potential uses before concluding the topic with a discussion of standard costing and cost control.

Fundamental Management Accounting Concepts

Management accounting is the branch of accounting designed to meet the needs of internal users. It is concerned with an information process and system that measures and provides financial and non-financial information to assist managerial decision making, motivate behaviour and create a culture which will achieve the stated objectives of the organisation.

Analysis and Interpretation of Financial Statements

The income statement, the balance sheet, changes in equity and the cash flow statement provide explicit 'bottom line' indicators, however is of little significance unless provided additional context. These contexts are measured by financial ratios. Interpretation of such ratios must follow calculation.

Financial analysis techniques can be used to show:

  • areas of operation where performance is deteriorating
  • areas of operation where performance is below that of companies operating in the same area of business activity

Funding and Corporate Government Issues

Different methods used to fund organisations and different funding structures affect the financial viability of organisations. Corporate governance has particular importance in both private and public sector organisations particular due to various accounting scandals. There is emerging use of public-private partnerships to provide improved public infrastructure without excessive use of debt finance.

Financial Statements

Under the Corporations Law and AASB 101 Presentation of Financial Statements, any business organisation that is a reporting entity must include the following items in its general-purpose financial reports:

  • the director's report
  • the director's statement
  • a balance sheet (statement of financial position)
  • an income statement (statement of financial performance or profit and loss statement)
  • a statement of changes in equity
  • a cash flow statement

Fundamental Financial Accounting Concepts

The four main concepts that underlie financial statements are:

  1. Accounting entities and reporting entities
  2. The accounting equation
  3. Accrual accounting
  4. Profit

Over the past two decades the accounting profession has developed an internationally agreed description of the concepts in financial reporting.

Financial Management - An Overview

Financial management is the process of planning, controlling and evaluating financial decisions. The assumed goal is the maximisation of shareholder wealth in for-profit organisations and deliver nominated services in a not-for-profit. Business organisations are defined as sole properietorship, partnership, companies (public and proprietary) and can be distinguished by their liability, limited, unlimited and, in the case of mining companies, no liability.

Syndicate content