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The accounting function

Terms in this set (18)

Accurate information
accurate, complete, cost effective, understandable, reliable, accessible, timely and easy to use.
Data
is raw facts, unprocessed.
Information
is data that has gone through some form of process and is meaningful. This is important in the decision-making function.
Primary information
is information collected for your own purposes. For example, market research into the demand for a new product.
Secondary information
is information not collected specifically for your own purpose but for someone else or for another reason. For example, government statistics on births.
Internal sources of information
information gathered within an organisation such as accounting information about customer purchases and production information.
External sources of information
information gathered from outside the organisation. For example, information about tax rates and market demand information.
Financial accounting
the recording, summarising and presentation of financial information. This is required for an organisations statutory accounts and to enable control of trade receivables and trade payables.
Management accounting
this is concerned with the production of financial reports to assist managers with their planning, control and decision making roles. This includes activities such as budgeting and performance appraisal.
Cost accounting
recording and preparing information on the costs incurred within an organisation. This can assist with cost control decisions. It can also help managers decide on the range of products to sell and the prices to charge for them.
Human resources/personnel
notifies the finance department about new employees joining the business, what their working hours are and their salary. This is used by finance to prepare payroll, produce budgeted labour costs and identify the labour resources available.
Sales department
notify the finance department when a sale has been made so the invoice can be raised. This allows finance to chase for payments as they fall due and keep financial records up to date, with the total sales figures.
Production department
provides the finance department with information about the amounts of raw materials used, number of labour hours worked and the volume of units produced. This enables finance to establish costings, comparisons to budgets, inventory/stock levels and hours worked for payroll.
Responsibility centres
these are parts of the organisation for which information can be obtained and performance can be measured. A manager is responsible for planning, control and decision making.
Costs centre
a production or service department or location for which costs can be ascertained.
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