Senior Accounting Title - Advanced Accounting Practice - independent subject foundations flashcards
Senior Accounting Title - Advanced Accounting Practice - independent subject foundations · Build recall with a focused review session.
30 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Absorption costing
- Costing method that assigns both variable and fixed production overheads to units produced, usually through predetermined overhead absorption rates, so inventory includes a share of fixed cost.
- Marginal costing
- Costing method charging only variable costs to units, treating fixed costs as period costs, and using contribution to judge profitability and short-term decisions.
- Contribution per unit
- Selling price less variable cost per unit, the amount each unit contributes towards covering fixed costs and then generating profit; used in break-even and limiting-factor decisions.
- Break-even point
- Level of sales at which total contribution equals fixed costs, so the business makes neither profit nor loss, expressed in units or in revenue.
- Relevant cost
- A future cash flow that differs between the alternatives under consideration, including opportunity costs but excluding already unavoidable sunk expenditure.
- Contribution
- Sales revenue less variable costs within the stated decision model; it first covers fixed costs before producing an operating profit.
- Limiting factor
- A scarce resource that restricts feasible activity, requiring comparison of contribution per unit of that resource when the assumptions justify it.
- Flexible budget
- A budget recalculated for a specified activity level using the applicable cost behavior assumptions, allowing more meaningful performance comparisons.
- Activity-based costing
- An approach assigning resource costs to activities and then to products using drivers reflecting their consumption of those activities.
- Target cost
- The allowable cost derived from a market-based price less the desired profit, used to investigate design and process alternatives.
- Residual income
- A profit measure less a specified capital charge, requiring consistent definitions of profit, invested capital and the relevant required return.
- Budget slack
- Deliberate understatement of expected revenues or overstatement of resource needs to make a negotiated performance target easier to achieve.
- Material usage variance
- The cost effect of actual material consumption differing from the standard quantity allowed for actual output, using the stated standard price.
- Working capital
- Resources and obligations associated with the short operating cycle; any calculation must specify whether it uses net current assets or operating items.
- Net present value
- Present value of incremental project cash flows less the initial outlay, calculated using consistent timing and an appropriate discount rate.
- Internal rate of return
- A discount rate that makes the specified net present value zero; nonconventional cash flows may produce multiple solutions or none.
- Payback period
- Time required for specified cumulative cash inflows to recover the initial investment; ordinary payback does not itself incorporate discounting.
- Capital rationing
- A constraint on investment funding that requires choosing feasible projects or divisible project portions under the assumptions supplied.
- Opportunity cost
- The benefit forgone by choosing one use of a resource rather than its next best feasible alternative.
- Sensitivity analysis
- A method of changing an input and examining its effect on a result, without automatically assigning probabilities to that input change.
- WACC
- A weighted cost of debt and equity financing under specified assumptions, using consistent values and treatment of any available tax shield.
- Capital budgeting
- Evaluation of long-term investment alternatives through incremental cash flows, financing consistency, uncertainty and relevant strategic considerations.
- Ansoff matrix
- A framework classifying growth options by existing or new products and markets. It supports comparison of strategic changes, but the actual risk depends on capabilities, commitment and the particular situation.
- Business strategy
- The long-term plan of action a firm adopts to achieve its objectives and gain advantage over rivals, given its resources and environment. It involves choices about markets, products and methods of competing.
- SWOT analysis
- A review of a firm's internal strengths and weaknesses and external opportunities and threats. It informs strategy by matching capabilities to the environment, though it can become a static list if not updated.
- PEST analysis
- An examination of political, economic, social and technological influences on a business. It helps anticipate external change and shape strategy, but it is descriptive and does not by itself prescribe action.
- Takeover
- Acquiring control of another business by buying enough of its shares, often as a faster route to growth than internal expansion. It brings immediate capacity but risks overpaying and clashing cultures.
- Merger
- The joining of two businesses into a single organisation, usually presented as a partnership of equals. It can create synergies and market power, but integration problems often erode the expected benefits.
- Assurance
- A supported engagement conclusion about defined subject matter against suitable criteria, whose scope and level depend on the identified framework.
- Audit criterion
- The benchmark used to evaluate subject matter, which must be suitable for the engagement and not invented after seeing the result.