adhering to given strategic objectives of the organisation, ... Accounting Systems and Controls ... Analyse: separate in
AAT Professional Diploma in Accounting (Level 4)
Level 4 BC3600817 – PDF
Financial Statements of Limited Companies
Financial Statements of Limited Companies
Profitability ratio vs Liquidity ratio. What’s the difference?
Use of resources ratios vs Financial position ratios. What’s the difference?
Profitability ratios focus on the measurement of expenditure (or segments of expenditure) vs income, or measure profit against investment. Liquidity ratios measures the financial stability of an organisation – is it likely to be able to pay its liabilities as they become due, or is it in danger of defaulting on debts?
Use of resources ratios measure the efficiency of the organisation. How quickly does it sell inventories? How well does it collect payments? How well is it using the funds flowing through the business? Financial position ratios look at the long term financing of the company. Is it relying too heavily on loans that it may not be able to service?
Management Accounting: Budgeting
Management Accounting: Budgeting
The budget committee. What’s its role?
Compare like with like. Why?
This committee, often made up of the senior staff of an organisation, is responsible for the finances of the organisation. They may prepare and monitor the budget, adhering to given strategic objectives of the organisation, and either approve or recommend the budget to a governing board for approval.
Comparing January’s figures to August will not give a realistic view of how the finances of an organisation is changing over time because of seasonal sales variations; January must be compared with January. Equally, comparing wages with electricity or a building company’s performance against a sports centre, does not give relevant information. Comparing like with like will tell you how you’re doing compared with last year or with your industry competitors.
Management Accounting: Decision and Control
Standard costing. What are the four different types of standard?
Management Accounting: Decision and Control
Goal congruence. What is it?
Ideal, target, normal and basic.
Goal congruence happens when organisational goals and individual goals agree. If individuals who are working for an organisation have personal aims, which are not aligned with those of the organisation, then the efficiency of the organisation will be affected and this can be problematic. When there is goal congruence, then everyone is working together to achieve a mutual objective.
Management Accounting: Decision and Control
Accounting Systems and Controls
Lifecycle vs Target costing. What’s the difference?
Internal controls. Why have them?
Lifecycle costing is used for items that are expected to be marketable for short periods, like mobile phones. The whole cost including development, marketing, production and decommissioning must be estimated and worked into the costs of the product to ensure early break even. Target costing is where a selling price is set by marketing and the product is designed to keep production costs low enough to allow a targeted profit. Target costing is often used within lifecycle costing.
Internal controls ensure that company resources are used correctly, putting restrictions on who can authorise expenditure, and to what amount. They minimise the risk of errors and fraud and ensure that financial reporting is as accurate as possible.
Accounting Systems and Controls
Accounting Systems and Controls
What is a cost benefit analysis?
Analyse vs Evaluate. What do they mean?
An analysis of the cost of a business decision. Usually used to consider a project in terms of any increase or reduction in organisational costs or income, it helps managers to decide if the project is worthwhile or not. For example, a new procedure may cost £1,000 in staff wages per month but only save £900 of materials. The business may decide that it’s more effective to use up extra materials than to spend the extra staff wages, however, another business may decide that saving the materials is worth the cost because of corporate social responsibility policies.
Analyse: separate information into separate parts and identify their characteristics. Evaluate: make a judgement on something based on a range of factors, using available knowledge/experience/evidence.
