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management control system (MCS)

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Definition of management control system (MCS)

Management Control System (MCS) Image 1

management control system (MCS)

an information system that helps managers gather information about actual organizational occurrences, make comparisons against plans,
effect changes when they are necessary, and communicate
among appropriate parties; it should serve to guide organizations
in designing and implementing strategies so that
organizational goals and objectives are achieved



Related Terms:

Abusive Earnings Management

The use of various forms of gimmickry to distort a company's true financial performance in order to achieve a desired result.


Abusive Earnings Management

A characterization used by the Securities and Exchange
Commission to designate earnings management that results in an intentional and material misrepresentation
of results.


Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.


Accounting system

A set of accounts that summarize the transactions of a business that have been recorded on source documents.


activity-based management (ABM)

a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
by a customer and the resulting profit achieved by providing
this value



actual cost system

a valuation method that uses actual direct
material, direct labor, and overhead charges in determining
the cost of Work in Process Inventory


Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.


Management Control System (MCS) Image 2

Automated storage/retrieval system

A racking system using automated systems
to load and unload the racks.


Bottom-up equity management style

A management style that de-emphasizes the significance of economic
and market cycles, focusing instead on the analysis of individual stocks.


Budgetary control

The process of ensuring that actual financial results are in line with targets – see variance
analysis.


business intelligence (BI) system

a formal process for gathering and analyzing information and producing intelligence to meet decision making needs; requires information about
internal processes as well as knowledge, technologies, and competitors


Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.


Certified Management Accountant (CMA)

a professional designation in the area of management accounting that
recognizes the successful completion of an examination,
acceptable work experience, and continuing education requirements


charge-back system

a system using transfer prices; see transfer
price


Clearing House Automated Payments System (CHAPS)

A computerized clearing system for sterling funds
that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the
clearing companies within the structure of the Association for Payment Clearing Services (APACS).


Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.


Configuration control

Verifying that a delivered product matches authorizing
engineering documentation. This also refers to engineering changes made subsequent
to the initial product release.


Control

50% of the outstanding votes plus one vote.



Control account

An account maintained in the general ledger that holds the balance without the detail. The detail is maintained in a subsidiary ledger.


control chart

a graphical presentation of the results of a
specified activity; it indicates the upper and lower control
limits and those results that are out of control


control premium

the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control


controllable cost

a cost over which a manager has the ability to authorize incurrence or directly influence magnitude


Controllable profit

The profit made by a division after deducting only those expenses that can be controlled by the
divisional manager and ignoring those expenses that are outside the divisional manager’s control.


controllable variance

the budget variance of the two variance approach to analyzing overhead variances


Controlled disbursement

A service that provides for a single presentation of checks each day (typically in
the early part of the day).


Controlled foreign corporation (CFC)

A foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.


Controller

The corporate manager responsible for the firm's accounting activities.


controller

the chief accountant (in a corporation) who is responsible
for maintaining and reporting on both the cost
and financial sets of accounts but does not handle or negotiate
changes in actual resources



controller

Officer responsible for budgeting, accounting, and auditing.


controlling

the process of exerting managerial influence on
operations so that they conform to previously prepared plans


Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.


Cost control

The process of either reducing costs while maintaining the same level of productivity or maintaining costs while increasing productivity.


cost control system

a logical structure of formal and/or informal
activities designed to analyze and evaluate how well
expenditures are managed during a period


cost management system (CMS)

a set of formal methods
developed for planning and controlling an organization’s
cost-generating activities relative to its goals and objectives
cost object anything to which costs attach or are related


Cutoff control

A procedure for ensuring that transaction processing is completed
before the commencement of cycle counting.


Demand Management Policy

Fiscal or monetary policy designed to influence aggregate demand for goods and services.


DLOC (discount for lack of control)

an amount or percentage deducted from a pro rata share of the value of 100% of an equity interest in a business, to reflect the absence of some or all of the powers of control.


Du Pont system

A breakdown of ROE and ROA into component ratios.


Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.


Earnings Management

The active manipulation of earnings toward a predetermined target.
That target may be one set by management, a forecast made by analysts, or an amount that is consistent
with a smoother, more sustainable earnings stream. Often, although not always, earnings
management entails taking steps to reduce and “store” profits during good years for use during
slower years. This more limited form of earnings management is known as income smoothing.


Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.


enterprise resource planning (ERP) system

a packaged software program that allows a company to
(1) automate and integrate the majority of its business processes,
(2) share common data and practices across the entire enterprise, and
(3) produce and access information in a realtime environment


Enterprise resource planning system

A computer system used to manage all company
resources in the receipt, completion, and delivery of customer orders.


European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.


Exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or
on the purchase of the local domestic currency by foreigners.


Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the Federal
Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve Banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.


Federal Reserve System

The central banking authority responsible for monetary policy in the United States.


Financial control

The management of a firm's costs and expenses in order to control them in relation to
budgeted amounts.


flexible manufacturing system (FMS)

a production system in which a single factory manufactures numerous variations
of products through the use of computer-controlled
robots
focused factory arrangement
an arrangement in which a
vendor (which may be an external party or an internal corporate
division) agrees to provide a limited number of
products according to specifications or to perform a limited
number of unique services to a company that is typically
operating on a just-in-time system


Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
foreign currencies by residents or on the purchase/sale of local currency by nonresidents.


GMCs (guaranteed mortgage certificates)

First issued by Freddie Mac in 1975, Gmcs, like PCs, represent
undivided interest in specified conventional whole loans and participations previously purchased by Freddie Mac.


hybrid costing system

a costing system combining characteristics
of both job order and process costing systems


Immigration Reform and Control Act of 1986

A federal Act requiring all employers having at least four employees to verify the identity and employment
eligibility of all regular, temporary, casual, and student employees.


Imputation tax system

Arrangement by which investors who receive a dividend also receive a tax credit for
corporate taxes that the firm has paid.


Institute of Management Accountants (IMA)

an organization composed of individuals interested in the field of management accounting; it coordinates the Certified management
Accountant program through its affiliate organization
(the Institute of Certified management Accountants)


Interac system

Canada's bank machine and electronic debit system. If you use your bank card at a bank machine which displays the Interac symbol (and that bank machine is not your bank's machine), you will be charged a fee.


internal accounting controls

Refers to forms used and procedures
established by a business—beyond what would be required for the
record-keeping function of accounting—that are designed to prevent
errors and fraud. Two examples of internal controls are (1) requiring a
second signature by someone higher in the organization to approve a
transaction in excess of a certain dollar amount and (2) giving customers
printed receipts as proof of sale. Other examples of internal
control procedures are restricting entry and exit routes of employees,
requiring all employees to take their vacations and assigning another
person to do their jobs while they are away, surveillance cameras, surprise
counts of cash and inventory, and rotation of duties. Internal controls
should be cost-effective; the cost of a control should be less than
the potential loss that is prevented. The guiding principle for designing
internal accounting controls is to deter and detect errors and dishonesty.
The best internal controls in the world cannot prevent most fraud
by high-level managers who take advantage of their positions of trust
and authority.


internal control

any measure used by management to protect
assets, promote the accuracy of records, ensure adherence
to company policies, or promote operational efficiency;
the totality of all internal controls represents the
internal control system


job order costing system

a system of product costing used
by an entity that provides limited quantities of products or
services unique to a customer’s needs; focus of recordkeeping
is on individual jobs


Just-in-time inventory systems

systems that schedule materials/inventory to arrive exactly as they are
needed in the production process.


just-in-time manufacturing system

a production system that attempts to acquire components and produce inventory only as needed, to minimize product defects, and to
reduce lead/setup times for acquisition and production


lock-box system

system whereby customers send payments to a post office box and a local bank collects and processes checks.


MACRS (Modified Accelerated Cost Recovery System)

A depreciation method created by the IRS under the Tax Reform Act of 1986. Companies must use it to depreciate all plant and equipment assets installed after December 31, 1986 (for tax purposes).


Management

management refers to the individuals in an entity that have the authority and the responsibility to manage the entity. The positions of these individuals, and their titles, vary from one entity to another and, to some extent, from one country to another depending on the local laws and customs. Thus, when the context requires it, the term includes the board of directors or committees of the board which are designated to oversee certain matters (e.g., audit committee).


Management accounting

The production of financial and non-financial information used in planning for the future; making decisions about products, services, prices and what costs to incur; and ensuring that plans are implemented and achieved.


management accounting

a discipline that includes almost
all manipulations of financial information for use by managers
in performing their organizational functions and in
assuring the proper use and handling of an entity’s resources;
it includes the discipline of cost accounting


Management Accounting Guidelines (MAGs)

pronouncements of the Society of management Accountants of
Canada that advocate appropriate practices for specific
management accounting situations


Management buyout (MBO)

Leveraged buyout whereby the acquiring group is led by the firm's management.


management buyout (MBO)

Acquisition of the firm by its own management in a leveraged buyout.


Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.


management control

This is difficult to define in a few words—indeed, an
entire chapter is devoted to the topic (Chapter 17). The essence of management
control is “keeping a close watch on everything.” Anything can
go wrong and get out of control. management control can be thought of
as the follow-through on decisions to ensure that the actual outcomes
happen according to purposes and goals of the management decisions
that set things in motion. Managers depend on feedback control reports
that contain very detailed information. The level of detail and range of
information in these control reports is very different from the summarylevel
information reported in external income statements.


management expense ratio (MER)

The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.


Management fee

An investment advisory fee charged by the financial advisor to a fund based on the fund's
average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.


management fee

The fee paid to the fund’s manager for supervising the administration of the fund.


management information system (MIS)

a structure of interrelated elements that collects, organizes, and communicates
data to managers so they may plan, control, evaluate
performance, and make decisions; the emphasis of the
MIS is on internal demands for information rather than external
demands; some or all of the MIS may be computerized
for ease of access to information, reliability of input
and processing, and ability to simulate outcomes of
alternative situations


management style

the preference of a manager in how he/she interacts with other stakeholders in the organization;
it influences the way the firm engages in transactions and
is manifested in managerial decisions, interpersonal and
interorganizational relationships, and resource allocations


Modified Accelerated Cost Recovery System (MACRS)

Depreciation method that allows higher tax deductions in early years and lower deductions later.


Money management

Related: Investment management.


Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA
(cumulative volume, relative strength, moving average) Trading system of Pruitt and White.


noncontrollable variance

the fixed overhead volume variance;
it is computed as part of the two-variance approach to overhead analysis


Nonsystematic risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
called unique risk or diversifiable risk. systematic risk refers to risk factors common to the entire economy.


normal cost system

a valuation method that uses actual
costs of direct material and direct labor in conjunction with
a predetermined overhead rate or rates in determining the
cost of Work in Process Inventory


open-book management

a philosophy about increasing a firm’s performance by involving all workers and by ensuring
that all workers have access to operational and financial
information necessary to achieve performance improvements


Operational Earnings Management

management actions taken in the effort to create stable
financial performance by acceptable, voluntary business decisions. An example: a special discount
promotion to increase flagging sales near the end of a quarter when targets are not being met.


Overdraft System

system whereby a depositor may write cheques in excess of the balance, with the bank automatically extending a loan to cover the shortage.


Passive investment management

Buying a well-diversified portfolio to represent a broad-based market
index without attempting to search out mispriced securities.


performance management system

a system reflecting the entire package of decisions regarding performance measurement and evaluation


Periodic inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.


Perpetual inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold each time a sale is made.


Planning, programming and budgeting system (PPBS)

A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.


PLUS system

A bank machine network outside Canada, across the U.S. and internationally. Customers who use a bank machine with a 'PLUS' symbol may be charged a fee.


Portfolio management

Related: Investment management


Price System

See market mechanism.


process costing system

a method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products;
it accumulates costs by cost component in each production department and assigns costs to units using equivalent units of production


Progressive tax system

A tax system wherein the average tax rate increases for some increases in income but
never decreases with an increase in income.


pull system

a production system dictated by product sales
and demand; a system in which parts are delivered or produced
only as they are needed by the work center for which
they are intended; it requires only minimal storage facilities


Pull system

A materials flow concept in which parts are only withdrawn after a
request is made by the using operation for more parts.


push system

the traditional production system in which
work centers may produce inventory that is not currently
needed because of lead time or economic production/
order requirements; it requires that excess inventory be
stored until needed


Push system

A materials flow concept in which parts are issued based on planned
material requirements.



 

 

 

 

 

 

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