Chapter 3
Basic Framework of Management Accounting
MANAGEMENT ACCOUNTING (also called Managerial Accounting or Internal Accounting) – a field of accounting that provides economic and financial information for internal users, particularly the managers or decision-makers in an organization
MANAGEMENT FUNCTIONS AND THE NEED FOR MANAGEMENT ACCOUNTING INFORMATION
1. PLANNING – involves:
a. setting of immediate, as well as long-range goals for the organization;
b. predicting future conditions that are expected to prevail;
c. considering the different means or strategies by which the goals set may be achieved; and
d. deciding which of the strategies should be used to attain such goals.
2. DIRECTING AND MOTIVATING – involves overseeing the day-to-day activities, seeing to it that the organization is functioning smoothly and the members of the organization are mobilized to carry out plans.
3. CONTROLLING – involves checking the performance of activities against the plan or standards set and deciding what corrective actions to take should there be any deviation between the actual and planned/standard performance.
> All the aforementioned management functions involve decision-making. In performing the decision-making function, managers need information. Such information is provided by management accountants.
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ACTIVITIES INVOLVED IN MANAGEMENT ACCOUNTING
* Determining, accumulating, and explaining costs – both manufacturing and non-manufacturing costs
* Computing or determining product cost/service cost
* Determining cost behavior
* Providing assistance to management in profit planning/budgeting
* Accumulating and presenting data which may be used by managers in decision-making
* Providing bases for cost control with the use of standard costs and other planned objectives
* Assisting managers in developing the company’s prices both for external and internal transactions
APPLICATION OF MANAGEMENT ACCOUNTING
* BUSINESS – managerial accounting provides the economic information needed by the businesses’ managers so they can attain their profit/other economic goals
* NON-PROFIT ORGANIZATIONS – these organizations likewise need the economic information provided by management accountants in attaining their organization’s objectives
PRINCIPLES GOVERNING THE DESIGN OF MANAGEMENT ACCOUNTING SYSTEMS
* The system should help to establish the decision-making authority over the organization’s assets.
* The information generated by the system should support planning and decision-making.
* The reports should provide a means for performance monitoring and evaluation.
DISTINCTIONS AMONG MANAGEMENT ACCOUNTING, COST ACCOUNTING, AND FINANCIAL ACCOUNTING
The accounting system is part of the organization’s management information system (MIS).
The cost accounting system, which accumulates data about the costs of producing goods and services, is part of the organization’s overall accounting system. It accumulates cost information for both management accounting and financial accounting.
MANAGEMENT ACCOUNTING vs. FINANCIAL ACCOUNTING
USERS OF REPORT
* MANAGEMENT ACCOUNTING: Internal users: officers and managers
* FINANCIAL ACCOUNTING: External users: stockholders, creditors, concerned government agencies
PURPOSE
* MANAGEMENT ACCOUNTING: To provide internal users with information that may be used by managers in carrying out the functions of planning, controlling, decision-making, and performance evaluation.
* FINANCIAL ACCOUNTING: To provide external users with information about the organization’s financial position and results of operations.
TYPES OF REPORTS
* MANAGEMENT ACCOUNTING: Different types of reports, such as budgets, financial projections, cost analyses, etc., depending on the specific needs of management.
* FINANCIAL ACCOUNTING: Primarily financial statements and the accompanying notes to such statements.
BASIS OF REPORTS
* MANAGEMENT ACCOUNTING: Reports are based on a combination of historical, estimated, and projected data.
* FINANCIAL ACCOUNTING: Reports are based almost exclusively on historical data.
STANDARDS OF PRESENTATION
* MANAGEMENT ACCOUNTING: In preparing reports, the management of a company can set rules to produce information most relevant to its specific needs.
* FINANCIAL ACCOUNTING: Reports are prepared in accordance with generally accepted accounting principles and other pronouncements of authoritative accounting bodies.
REPORTING ENTITY
* MANAGEMENT ACCOUNTING: Focus of reports is on the company’s value chain, such as a business segment, product- line, supplier, or customer.
* FINANCIAL ACCOUNTING: Financial reports relate to the business as a whole.
PERIOD COVERED
* MANAGEMENT ACCOUNTING: Reports may cover any time period – year, quarter, month, week, day, etc. Reports may be required as frequently as needed.
* FINANCIAL ACCOUNTING: Reports usually cover a year, quarter, or month.
STANDARDS OF ETHICAL CONDUCT FOR MANAGEMENT ACCOUNTANTS
(From the American Institute of Management Accountants)
Management accountants have an obligation to the organizations they serve, their profession, the public, and themselves to maintain the highest standards of ethical conduct. In recognition of this obligation, the Institute of Management Accountants, formerly the National Association of Accountants, has promulgated the following standards of ethical conduct for management accountants. Adherence to these standards is integral to achieving the Objectives of Management Accounting. Management accountants shall not commit acts contrary to these standards nor shall they condone the commission of such acts by others within their organizations.
COMPETENCE
Management accountants have the responsibility to:
* maintain an appropriate level of professional expertise by continually developing knowledge and skills.
* perform their professional duties in accordance with relevant laws, regulations, and technical standards.
* disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.
RESOLUTION OF ETHICAL CONFLICT
In applying the standards of ethical conduct, management accountants may encounter problems in identifying unethical behavior or in resolving an ethical conflict. When faced with significant ethical issues, management accountants should follow the established policies of the organization bearing on the resolution of such conflict. If these policies do not resolve the ethical conflict, management accountants should consider the following courses of action:
* Discuss such problems with the immediate superior except when it appears that the superior is involved, in which case, the problem should be presented to the next higher managerial level. If satisfactory resolution cannot be achieved when the problem is initially presented, submit the issues to the next higher managerial level.
If the immediate superior is the chief executive officer, or equivalent, the acceptable reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact with levels above the immediate superior should be initiated only with the superior's knowledge, assuming the superior is not involved. Communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate, unless you believe there is a clear violation of the law.
* Clarify relevant ethical issues by confidential discussion with an impartial advisor to obtain a better understanding of possible courses of action.
* consult your own attorney as to legal obligations and rights concerning the ethical conflict.
CONTROLLER: The Chief Management Accountant
CONTROLLER – the chief management accounting executive of an organization who is mainly responsible for the accounting aspects of management planning and control
FUNCTIONS OF THE CONTROLLER
* PLANNING FOR CONTROL – to establish, coordinate, and administer, as an integral part of management, an adequate plan for the control of operations.
* REPORTING AND INTERPRETING – to compare performance with operating plans and standards and to report and interpret results of operations to the concerned users of such reports.
* EVALUATING AND CONSULTING – to consult with all levels of management responsible for policy or action concerning any phase of the operation of the business as it relates to the attainment of objectives and effectiveness of policies, organizational structures, and procedures.
* TAX ADMINISTRATION – to establish and administer tax policies and procedures.
* GOVERNMENT REPORTING – to supervise or coordinate the preparation of reports to government agencies.
* PROTECTION OF ASSETS – to assure protection for the assets of business through internal control, internal auditing, and assuring proper insurance coverage.
* ECONOMIC APPRAISAL – to continuously appraise economic and social forces and government influences and to interpret their effect upon the business.
DISTINCTIONS BETWEEN CONTROLLERSHIP AND TREASURERSHIP
CONTROLLERSHIP
* Planning and control
* Reporting and interpreting
* Evaluating and consulting
* Tax administration
* Government reporting
* Protection of assets
* Economic appraisal
TREASURERSHIP
* Provision of capital
* Investor relations
* Short-term financing
* Banking and custody
* Credit and collections
* Investments
* Insurance
CERTIFICATION AVAILABLE TO MANAGEMENT ACCOUNTANTS
THE CMA PROGRAM OR CERTIFICATE IN MANAGEMENT ACCOUNTING
The CMA Program or Certificate in Management Accounting is a program for management accountants designed to recognize their unique qualifications, high standards, and professional expertise in the field of management accounting.
Qualified management accountants earn the designation Certified Management Accountant (CMA), the internal accountant’s counterpart to the Certified Public Accountants (CPA).
THE ORGANIZATION INVOLVED
In the United States, the CMA Program is conducted by the Institute of Management Accountants (IMA), the largest US Professional organization of accountants.
In the Philippines, the Philippine Association of Management Accountants (PAMA) conducts the Certificate in Management Accounting (CMA) program through its continuing education arm, the Philippine Institute of Management Accountants (PIMA). The PAMA is affiliated with the Institute of Management Accountants or IMA.
The PAMA was founded primarily to provide its members with professional and educational activities that enhance their knowledge of management accounting principles and methods.
OBJECTIVES OF THE PROGRAM
The CMA has four objectives, consistent with the mission of the Philippine Association of Management Accountants (PAMA) to "promote management accounting, enhance the capability of its members and foster high standards of professionalism."
* To establish Management Accounting as a recognized profession in the field of business
* To encourage stricter and high quality educational standards in Management Accounting
* To provide objective means for measuring the Management Accountant's knowledge and competence
* To encourage continued professional growth
REQUIREMENTS TO BECOME A CMA
To qualify for a Certificate in Management Accounting the interested applicant must fulfill the following requirements:
a. File an application for admission with the Institute of Certified Management Accountants thru PAMA and register for the CMA examinations
b. Be a member of the IMA thru PAMA
c. Pass all four (4) parts of the CMA examinations:
Part 1 – economics, finance, management
Part 2 – financial accounting and reporting
Part 3 – management reporting, analysis, and behavioral issues
Part 4 – decision analysis and information systems
* Management accounting experience requirements
* Two continuous years of professional experience in management accounting and/or financial management
* This requirement may be completed prior to or within seven years of passing the examination
* Teachers can meet this requirement if majority of their course load is in accounting and corporate financial management courses above the principles level.
* Professional experience can be gained in full-time employment. However, continuous part-time positions of 20 hours per week meeting the definition of qualified experience will count toward this requirement at a rate of one year of one year of experience for every two years of part-time employment.
Qualifying Experience Consists of the Following:
> Positions requiring judgments regularly made employing the principles of management accounting and financial management.
> Such employment includes financial analysis, budget preparation, management information systems analysis, financial management, management accounting, and auditing in government, finance or industry; management consulting; auditing in public accounting; research, teaching or consulting related to management accounting or financial management.
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Non-Qualifying Experience Consists of the Following:
> Employment requiring the occasional application of management accounting principles such as in computer...
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operations, sales and marketing, manufacturing, engineering, personnel, and general management will not satisfy this requirement
* Internships and trainee, clerical, or non-technical positions do not provide appropriate experience to fulfill this requirement.
* Comply with the Standards of Ethical Conduct for Management Accountants
Upon receiving the certificate, the successful CMA professional is expected to maintain high standards of professionalism and excellence in the field by meeting the following:
* Satisfaction of the Continuing Education Requirement
* Complying with the Standards of Ethical Conduct
* Maintaining membership with IMA through PAMA
While the CMA requirements are stiff, these are demanded by the high regard for CMA professionals uniformity accorded in Europe, the United States, and throughout the world. This same level of professional excellence is sought to be developed by the CMA program in the Philippines.
MULTIPLE CHOICE:
1. It is a field of accounting that provides financial information and nonfinancial information to an organization’s managers and other internal decision makers.
a. Cost accounting
b. Bookkeeping
c. Managerial accounting
d. Financial accounting
Answer: C
* COST ACCOUNTING - a specialized field which involves the determination and interpretation of the cost per unit of business activities and manufactured products.
* BOOKKEEPING is the clerical side of accounting which involves the recording of routine, day-to-day transactions.
2. Which of the following statements is/are correct?
a. Managers carry out their planning function by mobilizing the organization’s resources and overseeing day-to-day operations.
b. Managers carry out their decision-making function by obtaining feedback to ensure that the plans are being followed.
c. The planning, directing and motivating, and controlling functions of a manager are kept separate from such manager’s decision-making activities.
d. The manager’s planning function involves setting of the organization’s goals and identifying alternatives and selecting the alternative that best furthers such goals set for the organization.
Answer: D
* Choice A refers to the directing function of managers;
* Choice B refers to management's control function.
* Choice C is incorrect. Decision-making is an integral part of all the functions of management.
3. Which of the following is/are false?
a. Managerial accounting is as concerned with providing information to stockholders as it is with providing information to managers.
b. Managerial accounting focuses more on the segments of an organization rather than on the organization as a whole.
c. Managerial accounting need not follow the Generally Accepted Accounting Principles (GAAP).
d. Managerial accounting is not mandatory, i.e., not required by any external law or regulation.
Answer: A
Managerial accounting's central purpose is to provide information to managers (internal users). The information needs of shareholders (external users) are provided through financial accounting.
4. In which of the following aspects is managerial accounting similar to financial accounting?
a. users of reports
b. emphasis between the past and future
c. type of data provided to users
d. reliance on the accounting database
Answer: D
Both managerial and financial accounting rely on the same accounting database. The other choices, A, B, and C, pertain to differences between managerial and financial accounting:
* Users of Reports: Management (Internal) vs. External users.
* Emphasis: Future decisions vs. Past financial consequences.
* Type of Data: Detailed segment reports vs. Summarized organization-wide data.
5. Which of the following describes management accounting information?
a. It is prepared for shareholders.
b. It is reliable and verifiable.
c. It is prepared in accordance with GAAP.
d. It provides reasonable and timely estimates.
Answer: D
6. Following are the principles governing the design of management accounting system, except
a. the system should help to establish the decision-making authority over the organization’s assets.
b. the information generated by the system should support planning and decision-making.
c. the reports should provide a means for performance monitoring and evaluation.
d. None of the above
Answer: D
Choices A, B, and C are the principles governing the design of management accounting system.
7. The American Institute of Management Accountants came up with the Standards of Ethical Conduct for Management Accountants which have four sections, namely
a. competence, confidentiality, integrity, and objectivity.
b. competence, security, integrity, and objectivity.
c. competence, confidentiality, integrity, and maturity.
d. competition, confidentiality, integrity, and objectivity.
Answer: A
Security, maturity, and competition are not part of the standards.
8. Financial and managerial accounting differ in a number of ways. In contrast to financial accounting, managerial accounting
a. focuses on providing data for external users.
b. emphasizes relevance and flexibility rather than precision.
c. is mandatory.
d. is governed by Generally Accepted Accounting Principles.
Answer: B
Choices A, C, and D are characteristics of financial accounting.
9. Provisions in this section of Ethical Standards for Management Accountants require management accountants to develop their knowledge and skills and to do their tasks in accordance with relevant laws, regulations, and standards.
a. Competence
b. Confidentiality
c. Integrity
d. Objectivity
Answer: A
The provisions on competence state that the management accountant has a responsibility to:
* maintain an appropriate level of professional competence by on-going development of their knowledge and skills;
* perform their professional duties in accordance with relevant laws, regulations, and technical standards;
* prepare complete and clear reports and recommendations after appropriate analyses of relevant and reliable information.
10. Provisions in this section of Ethical Standards for Management Accountants forbid management accountants to act on, or even appear to act on, confidential information they acquire in doing their work, except when authorized or when legally obligated to do so.
a. Competence
b. Confidentiality
c. Integrity
d. Objectivity
Answer: B
The provisions on confidentiality state that the management accountant has a responsibility to:
* refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so;
* inform subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitor their activities to assure the maintenance of that confidentiality;
* refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.
11. Provisions in this Ethical Standards for Management Accountants cover avoidance of conflicts of interest, improprieties of accepting gifts or favors, and other matters generally associated with professional behavior.
a. Competence
b. Confidentiality
c. Integrity
d. Objectivity
Answer: C
The provisions on integrity state, among others, that the management accountant has a responsibility to:
* avoid actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict;
* refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically;
* refuse any gift, favor, or hospitality that would influence or would appear to influence their actions;
* refrain from either actively or passively subverting the attainment of the organization's legitimate and ethical objectives, etc.
12. Per the Standards of Ethical Conduct, the management accountants have a responsibility to communicate information fairly and objectively, and disclose fully all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, comments, and recommendations presented. These provisions are contained in the standards on
a. integrity.
b. objectivity.
c. confidentiality.
d. competence.
Answer: B
The statement is actually the provisions contained in the standards on objectivity.
13. Which of the following statements relating to Standards of Ethical Conduct for Management Accountants is correct?
a. A management accountant should refuse all gifts and hospitality offered by one of the company’s suppliers.
b. A management accountant should inform his superiors regarding the confidentiality of information acquired in the course of their work and monitor their activities to assure the maintenance of that confidentiality.
c. A management accountant should prepare complete and clear reports and recommendations before appropriate analyses of relevant and reliable information.
d. Management accountants have a responsibility to disclose fully all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, comments, and recommendations presented.
Answer: D
This is covered by the ethical standard on objectivity.
* As regards Choice A, there is no absolute prohibition about accepting gifts. Gifts, favor, etc. should be refused if that would influence, or would appear to influence, the management accountant's action.
* Choice B – The subordinates, not the superiors, should be informed.
* Choice C – Reports, etc. should be prepared after appropriate analyses of relevant and reliable information.
14. Management accounting is used by a company's management for a multitude of purposes which are as follows, except
a. evaluation.
b. planning.
c. marketing.
d. reporting.
Answer: C Purposes (Uses) of Management Accounting:
* assurance of accountability
* planning
* control
* evaluation
* reporting
Marketing is not included in the above purposes. Management does not use management accounting for marketing per se.
15. Management accounting includes the following processes, except
a. measurement.
b. communication.
c. interpretation.
d. delegation.
Answer: D Following are the MANAGEMENT ACCOUNTING PROCESSES:
* measurement
* identification
* accumulation
* preparation
* interpretation
* communication
* analysis
Delegation is not among the processes listed above.
16. Managerial accounting differs from financial accounting in that financial accounting is
a. involved more heavily in decision analysis.
b. future oriented.
c. concerned primarily with external financial reporting.
d. concerned with qualitative information.
Answer: C
Financial accounting is primarily concerned with external financial reporting; it is concerned with quantitative information. Choices A and B are characteristics of management accounting.
17. Controllers are ordinarily concerned with
a. investor relations.
b. credit extension and collection of bad debts.
c. short-term financing.
d. preparation of tax returns.
Answer: D
The other choices, A, B, and C are functions of the treasurer.
18. The treasury function includes
a. preparation of tax returns.
b. cash custody and banking.
c. reporting to government.
d. financial reporting.
Answer: B
The other choices, A, C, and D are controllership functions.
19. If a management accountant has a problem in resolving an ethical conflict, the first action that should normally be taken is to
a. resign from the company.
b. notify the police.
c. discuss the problem with his/her immediate superior.
d. remain silent.
Answer: C
The first action that should be taken is to discuss the ethical problems with the management accountant's immediate superior. If the immediate superior is involved, the case should be taken to the next higher managerial level. Communicating with the police and other law enforcement agencies, as well as to other individuals not employed in the company is not appropriate, unless legally prescribed. Resignation is a last resort. Remaining silent will mean condonation of violation of others.
20. Integrity is an ethical requirement for all management accountants. One aspect of integrity requires
a. maintenance of an appropriate level of professional competence.
b. performance of professional duties in accordance with applicable laws.
c. refraining from improper use of confidential information.
d. avoidance of actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict.
Answer: D
Choices A and B pertain to the requirements on competence. Choice C is about confidentiality.
21. Statement 1: Managerial control and engineering control are synonymous.
Statement 2: Control from the viewpoint of management accounting is defined as the process of setting maximum limits on financial expenditures.
a. Statement 1: true; Statement 2: true
b. Statement 1: false; Statement 2: false
c. Statement 1: true; Statement 2: false
d. Statement 1: false; Statement 2: true
Answer: B
* Statement 1 is False – Managerial control is a human activity that focuses on how to help other humans in their work, while engineering control involves machines or equipment that automatically control situations or activities. This control of human activity distinguishes managerial control from engineering control.
* Statement 2 is False – From the viewpoint of management accounting, control may be defined as:
a. an action that implements the planning decision, and
b. performance evaluation that provides feedback of the results.
In performance evaluation, actual results are compared with the plan. The planned result may be based not on maximum limits, but on normal volume, master budget volume, or practical capacity, depending on management's needs.
22. The basic accounting records that are used to provide data for external financial reports are also employed in management accounting. In combining and reporting these data to management, however, the accountant can relax the verifiability constraint necessary in public financial reporting and instead prepare data which, although not adequately verifiable for external reporting, are more useful to management. This principle of management accounting considers the following factors are more important than others.
a. Verifiability, objectivity, and accuracy
b. Conservatism
c. Relevance, flexibility, and timeliness
d. Consistency and disclosure
Answer: C
Management accounting is not governed by GAAP. Some principles observed in financial accounting need not be observed in management accounting. Hence, more importance is given to relevance, flexibility, and timeliness.
23. Which of the following statements is false?
a. Cost accounting is a tool of both financial and managerial accounting.
b. Managerial accounting draws heavily on economics, statistics, operations research, and other disciplines as necessary in providing accounting and financial information.
c. In management accounting, emphasis is given to identifying or matching costs with functions, projects, or responsibilities rather than with time periods.
d. Financial accounting provides information to individuals within the business organization, while management accounting provides information to parties outside the business entity.
Answer: D
Financial accounting provides information to individuals outside the organization, while management accounting provides information to parties within the business entity.
24. That type of accounting which deals with how accounting and other financial data can be used for decision-making in controlling, monitoring, and directing business activity is called
a. management accounting.
b. responsibility accounting.
c. financial accounting.
d. general accounting.
Answer: A
This is one way of defining "management accounting."
25. In financial accounting, certain rules and regulations must be followed on how financial statements must be presented to readers. In managerial accounting, no such restrictions generally apply because it is
a. an entirely different field that need not observe the broad guidelines in financial accounting.
b. designed to provide management with non-financial information for decision-making.
c. designed to provide accounting and other financial data to assist management in making business decisions.
d. a discipline that does not require preparation of financial statements.
Answer: C
Since management accounting reports are intended for internal users to assist them in making business decisions, certain rules and regulations followed in preparation of financial statements for external users need not be observed. Even GAAP does not cover management accounting.
26. In comparing management and financial accounting, which of the following more accurately describes management accounting information?
a. comparable, verifiable, monetary
b. budgeted, informative, adaptable
c. required, estimated, internal
d. historical, precise, useful
Answer: B
Management accounting information, typically, are forecasted (budgeted), adaptable (flexible), informative, qualitative, may be non-financial or non-monetary, not mandatory (not required).
27. Which of the following statements about management or financial accounting is false?
a. Management accounting should be flexible.
b. Financial accounting must follow GAAP.
c. Management accounting is not subject to regulatory reporting standards.
d. Both management and financial accounting are subject to mandatory record-keeping requirements.
Answer: D
Management accounting, unlike financial accounting, is not subject to mandatory record-keeping requirements.
28. One certification available to management accountants is the Certificate in Management Accounting (CMA). In the Philippines, the Philippine Association of Management Accountants (PAMA) conducts the CMA Program, which has the following objectives, except:
a. to establish Management Accounting as a recognized profession in the field of business.
b. to encourage stricter and high quality educational standards in Management Accounting.
c. to provide objective means for measuring the Management Accountant’s knowledge and competence.
d. to supervise or coordinate the Management Accountant’s preparation of reports to government agencies.
Answer: D
29. Which of the following statements is false?
a. Management accounting is an integral part of the controller’s function in an organization.
b. The Standards of Ethical Conduct for Management Accountants include concepts related to competence, confidentiality, integrity, and objectivity.
c. Modern cost accounting plays a role in planning new products, evaluating operational processes, and controlling costs.
d. The COO (Chief Operating Officer) is primarily responsible for management accounting and financial accounting.
Answer: D
The controller is primarily responsible for management accounting and financial accounting.
30. Management accounting is considered successful when it
a. is relevant.
b. is accurate.
c. helps managers improve their decisions.
d. is in accordance with GAAP.
Answer: C
31. Which of the following statements is false?
a. Financial accounting reports are general-purpose and intended for external users.
b. Managerial accounting reports are special-purpose and issued as frequently as needed.
c. Top managers must certify that a company maintains an adequate system of internal control.
d. Management accountants have a single role within an organization - collecting and reporting costs to management.
Answer: D
Management accountants determine product costs and are held responsible for evaluating how well the company is employing its resources.
32. Which of the following is not an objective of management accounting?
a. maximization of profit and minimization of costs.
b. measuring the performance of managers of subunits.
c. providing information for planning and decision making.
d. providing assistance in directing and controlling operations.
Answer: A
33. Management Accountants
a. are found primarily at lower levels of the organizational hierarchy.
b. often work on cross-functional teams.
c. are found throughout an organization.
d. are found throughout an organization and work on cross-functional teams.
Answer: D
34. Management accounting and cost accounting
a. are required for recordkeeping as are financial accounting and tax accounting.
b. provide cost information about products and services, as well as information for internal decision making.
c. require an entirely separate group of accounts than financial accounting.
d. focus solely on the determination of costs to produce a product or provide a service.
Answer: B
35. Which of the following statements is true?
a. The management information system is part of an organization’s accounting system.
b. The cost accounting system is part of an organization’s overall accounting system.
c. Management accounting accumulates cost information for both cost accounting and financial accounting.
d. Two primary hallmarks of cost and management accounting are standardization of procedures and use of generally accepted accounting principles.
Answer: B
* The accounting system is part of an organization's management information system.
* Cost accounting accumulates cost information for both management accounting and financial accounting.
* Management accounting is not governed by the generally accepted accounting principles.