Planning phase
Setting goals and objectives for business activities
Performing phase
Completing the planned business activities and recording the results of those activities
Evaluating phase
Providing information to interested users to assess the success of the business activities
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Chapter 2Business Processes and Accounting InformationCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin2-*What are the 3 Phases of the Management Cycle?Planning phaseSetting goals and objectives for business activitiesPerforming phaseCompleting the planned business activities and recording the results of those activitiesEvaluating phaseProviding information to interested users to assess the success of the business activities2-*What are the 4 Business Processes?Business organization and strategy processDetermines the plan of action for the companyOperating processesProfit-making activities of the companyCapital resources processesFinancing and investing activities of the companyPerformance measurement and management processBalanced scorecard2-*What is the Balanced Scorecard?Holistic approach to planning and measuring performance4 perspectivesFinancialInternal CustomerLearning and growth2-*What Measures are Used in the Financial Perspective?Return on investment ratioRelationship between net income and assetsQuick ratioRelationship of liquid assets to current liabilitiesReturn on owners’ equityRelationship between net income and owners’ equityGross marginRelationship of gross margin to salesCurrent ratio (Chapter 1)Debt to equity ratio (Chapter 1)Return on sales ratio (Chapter 1)2-*What Measures are Used in the Internal Perspective?Value-added versus nonvalue-added timeCustomer response time—from when the customer places on order until the order is receivedActivity ratiosQualityPreventionAppraisalInternal failureExternal failure2-*What are the Voluntary Types of Quality Costs?PreventionReducing the opportunity for error to occurEmployee training, product and process designAppraisalFinding errors as early in the process as possibleContinuous inspection, testing2-*What are the Involuntary Types of Quality Costs?Internal failureCorrecting errors before the customer knows the error occurredRework; spoilage; downtimeExternal failureCorrecting errors after the customer knows the error occurredWarranties, lawsuits, customer ill will2-*What Measures are Used in the Customer Perspective?Market sharePercentage of total sales in the market generated by a particular companyCustomer satisfactionSurveysCustomer loyaltyGrowth, referrals, retention2-*What Measures are Used in the Learning and Growth Perspective?Research and development$ spent, new products developedEmployee growthTraining, continuing educationInformation systemsTechnology2-*What are the 5 Procedures of Internal Control?Proper authorizationSeparating incompatible dutiesMaintaining adequate documentationPhysically controlling assets and documentsProviding independent checks on performance2-*What are the Internal Controls for Cash?Cash receiptsSeparation of incompatible dutiesPhysical controlCash disbursementsProper authorizationSeparation of incompatible dutiesBank reconciliation2-*What is a Bank Reconciliation?Comparing the accounting records of cash to the bank records of the checking account(s)2 column bank reconciliationAdjusts bank balance Adjusts book (accounting records) balance2-*What are the Adjustments to the Bank Balance?Outstanding checksChecks written by the company that have not been processed (yet) by the bankSubtract from the bank balanceDeposits in transitDeposits made by the company that have not been processed (yet) by the bankAdd to the bank balanceErrors made by the bank 2-*What are the Adjustments to the Book (accounting) Balance?Interest earnedInterest-bearing checking accounts earn interestAdd to the book balanceService chargesFees charged by the bank for services renderedSubtract from the book balanceNSF checksChecks accepted by the company that “bounced” due to insufficient fundsSubtract from book balanceErrors made by the company