To provide Information to persons within an organization that enables them to make informed judgments and effective decisions which further the organization’s goals Basic functions: 1. To assist management in determining policies and in making plans. 2. To assist management In the planning, directions coordination, and control of operations. 3.
To maintain records and procedures that will adequately protect all Interests related to the business. ‘ RSI. Which of the following is not a characteristic of managerial accounting? A.Its purpose is to assist managers in planning and controlling business operations. B. Information must be developed In conformity either with generally accepted accounting principles or with Income tax rules c. Reports are used primarily by insiders rather than by persons outside of the business entity. D.
Information may be tailored to assist in specific managerial decisions. ARQ. Which of the following is a distinguishing feature of managerial accounting? A.
It describes the operating results of a business to the creditors of the business. B.It is designed to assist managers In planning and controlling the operations of a business. C. It focuses upon overall performance of the inure company, not upon individual departments or subunits of the company.
D. It generates reports to governmental agencies. ‘ The Management and its Functions namely, (1) planning, (2) organizing, (3) directing, (4) controlling, and (5) decision making.
The Planning Process It is concentrated in the formulation of the objectives, preliminary evaluation of alternatives, and selection of the best course to be implemented.Planning is “the determination of what is to be done, and of how, when and where and by whom it is to be done. ” (CAM Theory study guide). It serves to direct the activities of members to move the organization from where it is to where it wants to e?towards its goals.
Organizing ; Decision-Making Directing ; Decision-Making The Controlling Process Control is the process by which management assures itself that the organization is performing according to planned objectives. It is similar to a scale which checks the balance or at least congruence between the actual and the expected performance. Measures to improve and correct are then instituted to reach the benchmark the company is upholding. Internal control structure has as objectives the following: (1) safeguarding of assets, (2) verification of accounts, (3) adherence to the posed structure, and (4) appraisal.
Two primary purposes of control through feedback are: (1) Measurement, and (2) Regulation.Two management control approaches: (1) Imposed control (2) Self-control appropriate (2) congruent (3) operational (4) meaningful (5) economical (6) timely (7) simple A control system operates through the repetition of five sequential steps (Sesame, Ana, Corer, Revive): (1) Establishing standards of performance (or objectives) (2) Measuring actual performance (3) Analyzing performance and comparing it with standards (4) Constructing and implementing a program of corrective actions (5) Reviewing and revising standardsIt can be illustrated in the following diagram: (Source: Lane Anderson and Harold Goldenberg, “Managerial Accounting”, (Cincinnati: South-Western Publishing Co. Be) ARQ. Which one of the following sequences for performance reports can best be used in the management control process as a communications tool? A.
Plan approval, afterward, feedback, corrective action. B. Plan approval, afterward, corrective action, feedback. C. Afterward, plan approval, feedback corrective action. (CAM adapted) ARQ.The activities in a management system’s control can be grouped into four (1) Measurement of actual performance 2 2) Deciding and implementing corrective action 4 (3) Determining standard of performance 1 (4) Comparing actual performance versus standards and analyze results 3 The above steps must done in this sequence a.
4, 3,21 c. (Philipp adapted) ARQ. Management accounting is an integral part of the management process. As such, it provides essential information for the following objectives except.
.. A. Maintaining the current level of resource utilization as well as internal and external communication b. Measuring and evaluating performancec. Planning strategies and controlling current activities of the organization d.
Enhancing objectivity in decision-making ARQ. Measuring performance against objectives, determining causes of deviations and taking necessary corrective action describes which management duty? A. Organizing b. Planning c. Motivating d.
Controlling ARQ. Directing and channeling human behavior toward the accomplishment of objectives is: a.Staffing c. Organizing b. Motivating d. Planning ARQ.
Strategic planning is a long-range process that begins with: a. Goal setting c. Planning b. A master strategy d.
Organizing ARQ. The process of ensuring that a firm’s operating results are proceeding according to plan is referred to as: a. Planning c. Controlling b. Organizing d. Motivating IRAQI. Which of the functions of management involves the overseeing of day to-day Planning activities? A. B.
Organizing and directing d. Decision making RSI 1 .Cool Waters Manufacturing currently uses the company budget only as a planning tool. Management has decided that it would be beneficial to also budgets for control purposes. In order to implement this change, the management accountant must a. Organize a budget committee. C.
Report daily to operating management all deviations from plan. D. Synchronize the budgeting and accounting system with the organizational structure. IRAQ . Determine the truthfulness of each statement. 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. Statement 1 Statement 2 b. True d. False Financial Accounting versus Management Accounting Financial accounting involves the process of preparing the financial statements (I. E. Gathering of documents/evidences, analyzing transactions, summarizing recordings, adjustment preparations).
In short, it supplies financial information to management and external users. Financial accounting, basically, evolves around the ASS.Management accounting, on the other hand, involves the utilization of the financial statements and reports for decision-making by the management or the internal users. A more comprehensive comparison of the two accounting areas is clearly presented in the following table:3 AREAS of COMPARISON FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING Primary users of the report External users Internal users Unifying concept A=L+C None, may include Full Cost Cacti. , Differential Cacti. , Responsibility Accounting Principles Generally accepted accounting Principles OptionalMandated by government As needed Use of non-monetary information Monetary only Both monetary and non-monetary information Use of projected data Use of historical data Includes use of current figures, estimates for future activities, as well as historical data Emphasis on precision yes Timeliness ; relevance are more important Amount of detail Simplified w/ disclosures Extensive for analysis ; control Source of data Accounting Information system(Alls) SIS ; other disciplines Purpose Preparation of financial statements For management functions Focus on Segments Consolidation of segments Focus on individual segmentsIRAQ Management accounting..
. A. Is governed by generally accepted accounting principles.
B. Draws from disciplines other than accounting. C. Is geared primarily to the past rather than the future. D.
Places more emphasis on precision of data compared with financial accounting which does not. IRAQ . In financial accounting, certain rules and regulations must be followed on how financial statements must be presented to the reader. 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. Signed o 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 other financial statements are promptly prepared and submitted to preserve its usefulness b. Data may be both historical and estimates c.It must adhere to the GAP d. It provides information needed by management in making decisions IRAQ .
The following characteristics refer to financial accounting except… A. Provides information to external users b. Emphasizes on objective data .
As no externally imposed standards d. Generates general purpose financial statements IRAQ. To distinguish between management accounting and financial accounting, the following statements are correct, except..
. A. Management accounting, in view of its various integrated recipients should have a separate data recording and retrieval system from financial accounting. B. Financial accounting is bound by GAP, and management accounting need not be in conformity with GAP c. Financial accounting can be regarded as the process while management accounting can be regarded as the product of the process.
Management accounting output must be released on time so as not to erode its usefulness; Financial accounting output can still be useful even when delayed. IRAQ. One of the major differences between financial and managerial accounting is that: a. Financial accounting reports are prepared primarily for users external to the company. B. Managerial accounting standards are not under the Jurisdiction of the Securities and Exchange Commission.
C. Government regulations do not apply to managerial accounting. D. All of the above. IRAQ. Financial and managerial accounting is similar in that a.
Doth record the uncial history of an organization. B. Both rely on the concept of responsibility or stewardship. C. Both have a strong future orientation. D. Both rely on generally accepted accounting principles.
IRAQ. Managerial accounting a. Has its primary emphasis on the future. B.
Is required by regulatory bodies such as the SEC. C. Focuses on the organization as a whole, rather than on organization’s segments. D. Responses a, b, and c are all correct. IRAQ. To distinguish between management accounting and financial accounting, the following statements are correct except: a.Management accounting in view of its yester from financial accounting.
B. Financial accounting is bound by generally conformity with GAP. C. Financial accounting can be regarded as the process while management accounting can be regarded as the product of that process. D. Management accounting output must be released on time so as not to erode its usefulness; Financial accounting output can still be useful even when delayed. IRAQ Which of the following characteristics does not relate to management accounting? A. Accounting reports may include non-monetary information b.
It is subject to restrictions imposed by GAP c.Reports are often based on estimates and are seldom useful for anything other than the purpose for which they are prepared d. It provides data for internal users within the business organization The Expanding Role of Management Accountants At present, three positions belonging to the top management, can be referred to as the managerial accountants in a firm, namely, the controller (or the chief accountant), the treasurer, and the internal auditor. The controller is responsible for supervising the accounting personnel and for preparing the reports used in both managerial accounting and financial accounting.He is somewhat the “internal consultant” of the firm. The treasurer is responsible for sourcing out of funds and protection of assets. While the internal auditor acts as the watchdog in the firm, on the lookout for areas for recommendations to improve the accounting system. A management consultant, outside the firm, can also be hired for special engagements who follow management advisory services (MASS) standards of practice.
With the increasing responsibility being placed upon the shoulders of managerial accountants, ethical standards have been developed for the practice of the profession.Standards include competence, confidentiality, integrity, and objectivity. The Conceptual Framework (Reference: Institute of Management Accountants Practice Statement No. 1 _Accounting Concepts, Revised 1998) The description of management accounting developed in this statement can be elaborated through a set of concepts categorized in terms of: process in organizations; These concepts describe the function in terms of its resource productivity focus, value orientation, business process orientation and team orientation.Key Question: How should management accounting practice be developed? Resource Productivity Focus The management accounting process is focused on the efficient and effective use of resources in organizations. Attention is focused on the transformation of resources in and out of financial forms, and on attendant patterns of waste (resource loss) and value generation (effective use of resources). Resources in monetary and physical forms are scrutinized, along with resources consumed by organizational structures, systems, procedures, processes and human resources practices.
IRAQ.This concept advocates that information is a valuable resource and must therefore be managed like other factors of production manpower, materials ND money This is: a. Integrated information system b. Systems audit c. Information resource management d.
Systems security management Value Orientation The effectiveness of resource use is Judged in terms of the value generated in both product/service markets (for customers) and capital markets (for shareholders), while satisfying the requirements of other key organizational stakeholders (including suppliers, staff, financiers, and the community at large).Resource use is Judged effective if it optimizes value generation over the long run, with due regard to the externalities associated with an organization’s activities. Waste (resource loss, idle resources), unfocused use or consumption of resources, and inattention to environmental or social concerns are likely to be Judged ineffective. IRAQ. A series of activities in which customer usefulness is added to the product is the definition of.
.. A. Value chain b. Process value analysis c. BBC d. Cost measurement system Business Process Orientation Management accounting work is centered on the core and enabling business Thus, it is concerned with inter-relationships between organizational processes and inter-organizational value chains; interfaces between organizational processes ND work technologies, structures, systems and cultures; the alignment between organizational processes and product/service strategies; and the way in which resources are deployed, used and consumed by organizational processes in generating value over time.
Team Orientation The management accounting process is deployed within, and conducted through the various types of teams established to undertake the work of organizations. Teams may have a strategic, managerial, or operational focus; they may have a task, activity, process, or cross-functional orientation; and they may be given various forms f empowerment and developmental expectation. 2. He way in which the utility of the outcomes of the management accounting process can be tested; These concepts address the utility of the work outcomes of the management accounting function, and how it might be assessed in terms of accountability, performance criteria, and benchmark performance. Key Question: How should the usefulness of management accounting practice be tested? Accountability The outcomes of the management accounting process are assessed in terms of the value they add to an organization, Judged from the perspective of users of the outcomes.Thus, the accountability of the management accounting function is outwardly directed, to organizational participants served by the function.
Performance Criteria The value to be added by management accounting work to an organization can be expressed in terms of staged performance objectives, negotiated and agreed to within an organization. Benchmarking Performance The performance objectives used to express management accounting accountabilities within an organization should reflect the outcomes of benchmarking management accounting work across organizations.