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intro to managerial accounting > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is the primary purpose of managerial accounting?

A

Provides economic and financial information for managers and other internal users.

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2
Q

Who are the primary users of financial accounting reports?

A

External users: stockholders, creditors, and regulators.

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3
Q

Who are the primary users of managerial accounting reports?

A

Internal users: officers and managers.

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4
Q

What types of reports do financial and managerial accounting produce?

A
  • Financial accounting: Financial statements, quarterly and annually.
  • Managerial accounting: Internal reports, as frequently as needed.
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5
Q

What is the main difference in the purpose of reports between financial and managerial accounting?

A
  • Financial accounting: General-purpose.
  • Managerial accounting: Special-purpose for specific decisions.
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6
Q

What is the content of financial accounting reports?

A

Pertains to business as a whole, highly aggregated, and limited to double-entry accounting and cost data.

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7
Q

What is the content of managerial accounting reports?

A

Pertains to subunits of the business, very detailed, and extends beyond double-entry accounting to any relevant data.

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8
Q

How are financial accounting reports verified?

A

Audited by CPA.

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9
Q

How are managerial accounting reports verified?

A

No independent audits.

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10
Q

What are the three broad functions of management?

A
  • Planning
  • Directing
  • Controlling
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11
Q

What is one aspect of the planning function in management?

A

Maximize short-term profit and market share.

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12
Q

What is the directing function in management?

A

Coordinate diverse activities and human resources.

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13
Q

What does the controlling function in management involve?

A

Keeping activities on track and determining whether goals are met.

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14
Q

True or False: Managerial accountants have a single role within an organization.

A

False

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15
Q

True or False: Financial accounting reports are general-purpose and intended for external users.

A

True

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16
Q

True or False: Managerial accounting reports are special-purpose and issued as frequently as needed.

A

True

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17
Q

What are the classes of manufacturing costs?

A
  • Direct materials
  • Direct labor
  • Manufacturing overhead
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18
Q

What are direct materials?

A

Raw materials that can be physically and directly associated with finished goods.

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19
Q

What are indirect materials?

A
  • Not physically part of finished product
  • Impractical to trace to finished product due to small cost
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20
Q

What is direct labor?

A

Work of factory employees that can be physically and directly associated with converting raw materials into finished goods.

21
Q

What is indirect labor?

A

Work of factory employees that has no association with finished product or is impractical to trace costs to goods produced.

22
Q

What does manufacturing overhead include?

A

Costs indirectly associated with manufacturing the finished product.

23
Q

What are product costs?

A
  • Direct materials
  • Direct labor
  • Manufacturing overhead
24
Q

How are product costs recorded?

A

Recorded in ‘inventory’ account and not an expense until goods are sold.

25
Q

What are period costs?

A

Charged to expense as incurred and includes all selling and administrative expenses.

26
Q

What is the formula for calculating the cost of goods manufactured?

A

Total Manufacturing Costs - (cost of beginning work in process + total manufacturing costs for the current period).

27
Q

What are the three inventory accounts of a manufacturer?

A
  • Raw Materials Inventory
  • Work in Process Inventory
  • Finished Goods Inventory
28
Q

What does Raw Materials Inventory show?

A

The cost of raw materials.

29
Q

What does Work in Process Inventory show?

A

The cost applicable to units that have been started into production but are only partially completed.

30
Q

What does Finished Goods Inventory show?

A

The cost of completed goods on hand.

31
Q

What does Raw Materials Inventory show?

A

The cost of raw materials

Raw materials are the basic inputs used in the production process.

32
Q

What is Work in Process Inventory?

A

The cost applicable to units that have been started into production but are only partially completed

This inventory reflects the costs incurred for products that are not yet finished.

33
Q

What does Finished Goods Inventory represent?

A

The cost of completed goods on hand

This inventory includes all products that are ready for sale.

34
Q

How many categories of inventory does a merchandising company show on its balance sheet?

A

One category

Merchandising companies typically only need to track finished goods.

35
Q

What is the purpose of the Cost of Goods Manufactured schedule?

A

To summarize the costs incurred to manufacture products during a specific period

This schedule includes raw materials, labor, and overhead costs.

36
Q

What significant trend has occurred in the U.S. economy regarding employment?

A

Over 50% of U.S. workers are now employed by service companies

This reflects a shift from manufacturing to service-oriented jobs.

37
Q

What does the Value Chain refer to?

A

All business processes associated with providing a product or service

It includes activities from production to delivery.

38
Q

Define Just-In-Time (JIT) Inventory Method.

A

A system in which goods are manufactured or purchased just in time for sale

This method aims to reduce inventory costs.

39
Q

What is the goal of Total Quality Management (TQM)?

A

To reduce defects in finished products, aiming for zero defects

TQM focuses on continuous improvement in quality.

40
Q

What does the Theory of Constraints aim to identify?

A

Constraints that limit a company’s potential profitability

It focuses on managing bottlenecks to enhance performance.

41
Q

What is the function of Enterprise Resource Planning (ERP)?

A

Software programs designed to manage all major business processes

ERP integrates various functions into one complete system.

42
Q

What does Activity-Based Costing (ABC) do?

A

Allocates overhead based on use of activities

This method results in more accurate product costing.

43
Q

What does the Balanced Scorecard evaluate?

A

Operations in an integrated fashion using both financial and non-financial measures

It links performance to overall company objectives.

44
Q

True or False: All employees are expected to act ethically.

A

True

Ethical behavior is a fundamental expectation in business.

45
Q

What does the Sarbanes-Oxley Act (SOX) clarify?

A

Management’s responsibilities, including certifications by CEO and CFO

SOX aims to protect shareholders from accounting errors and fraudulent practices.

46
Q

What does Corporate Social Responsibility consider?

A

A company’s efforts to employ sustainable business practices

It evaluates performance regarding people, planet, and profit.

47
Q

Fill in the blank: A company’s efforts to employ sustainable business practices is referred to as _______.

A

Corporate Social Responsibility

This term encompasses a company’s commitment to ethical behavior and sustainability.

48
Q

What is the Statement of Ethical Professional Practice?

A

A code of ethical standards developed by the Institute of Management Accountants

It serves as a guideline for ethical behavior in management accounting.

intro to managerial accounting (3 decks)

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