Chapter 1 - Introduction

Question 1

What is meant by managerial accounting?

Answer 1

One of the major roles of Managerial accounting is to supply information that facilitates and improves decision making.

Uses the firm’s accounting system, and formats the information in a way to support the information needs of managers.

Question 2

What three broad objectives has Managerial accounting?

Answer 2

To provide information for:
* Planning the organization’s actions
* Controlling the organization’s actions
* Making effective decisions

Question 3

What are the activities when using Managerial Accounting Information?

Answer 3

Planning, Controling, Decision Making

Question 4

What are the seven key differences between managerial respectively finance accounting?

Answer 4

1) USERS. MA: Managers who plan for and control an organization, FA: External persons who make financial decisions.

2) TIME FOCUS. MA: Future, FA: Historical.

3) VERIFIABILITY VERSUS RELEVANCE. MA: Emphasis on relevance. FA: Emphasis on objectivity and verifiability.

4) PRECISION VERSUS TIMELINESS. MA: Emphasis on timeline. FA: Emphasis on precision.

5) SUBJECT. MA: Focus on segment reports. FA: Primary focus is on companywide reports.

6) RULES. MA: No mandatory rules, FA: must follow GAAP/IFRS

7) REQUIREMENT. MA: Not mandatory. FA: Mandatory for external reports.

Question 5

What is Activity-Based costing (ABC)?

Answer 5

A more detailed approach to determining the cost of goods and services.

ABC improves costing accuracy by emphasizing the cost of the many activities or tasks that must be done to produce a product or offer a service.

Question 6

What is characteristic of management accounting reports?

1. The reports are prepared whenever stockholders request them.
2. The reports are prepared according to guidelines prepared by the Ontario Securities Commission (OSC).
3. The reports are prepared according to IFRS.
4. The reports are prepared to meet the needs of decision makers within the firm.

Answer 6

4. The reports are prepared to meet the needs of decision makers within the firm.

Question 7

Which of the following is a characteristic of financial accounting?

1. It has an emphasis on the future.
2. It has no regulatory or mandatory rules
3. It is concerned with the firm as a whole.
4. It is internally focused.

Answer 7

3. It is concerned with the firm as a whole.

Question 8

With which of the following do virtually all managerial accounting practices assist managers?

1. maximizing profits
2. determining costs
3. creating annual report
4. generating tax reports

Answer 8

1. maximizing profits