Managerial Accounting Exam #1

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What is the difference between management and financial accounting information in terms of the intended users of the informations?
Managerial accounting information is intended for use by managers of the business (insiders), whereas financial accounting information is distributed to outsiders as well as to managers. These outsiders include stockbrokers, creditors, potential investors, and the general public.
What is the difference between management and financial accounting information in terms of the purpose of the information?
Managerial accounting information is intended to assist managers in planning and controlling both the short-run and long-run activities of the business. Financial accounting information is primarily intended to present the operating results and financial position of the business entity as an aid to resource allocation decisions made by outside investors. Financial accounting information is also used for income tax purposes.
Describe the three principles guiding the design of management accounting systems.
1) to help guide who has decision-making authority over company assets; 2) to produce accounting information that is useful in planning and decision making; and 3) to provide information for monitoring, evaluating, and rewarding performance.
Is management accounting information developed in conformity with generally accepted accounting principles or some other set of prescribed standards?
Since management accounting information is developed for us primarily by a company’s management, it need not conform to generally accepted accounting principles or any other set of prescribed standards. However, management accounting information should be developed in a manner that is relevant to the decision at hand and not mislead the decision maker.
A manufacturing firm has three inventory control accounts. Name each of the accounts, and describe briefly what the balance in each at the end of any accounting period represents.
Three inventory control accounts that might be used by a manufacturing firm are materials inventory—the cost of materials on hand; work in process inventory—the cost of unfinished product on hand; and finished goods inventory—the cost of completed product on hand.
Statements that describe management accounting than financial accounting.
– information is tailored to the needs of individual decision makers
– emphasis is on expected future results
Manufacturing overhead costs would include:
– the salary of the production line supervisor
Products costs are expensed when..
..the product is sold
Period costs are expensed when..
..paid
benefits of budgeting
– enhanced management responsibility
– assignment of decision-making responsibilities
– coordination of activities
– perfomance evaluation
– decision-making
– communication
– motivation
– evaluation
Behavioral Approach
goals are set at reasonable and achievable levels
Total Quality Management Approach
goals are set at absolute efficiency, which is more difficult if not impossible to reach
Sequence of Budgets
1) sales budget
2) production budget
3) direct materials budget
4) direct labor budget
5) overhead budget
6) budgeted income statement
7) budgeted balance sheet
401k
401k defers the tax until later years.
capital investments and the time value of money
the systematic planning for long-term investments in company assets, such as office, buildings, equipments, manufacturing plants, computers, etc.
non-financial considerations
– effects on quality of the product
– effect on time of delivery to customer
– government regulations
– worker safety
– company image
– environmental concerns
– the boss says so
Categories: Managerial Accounting