Chapter 1

Question 1

What is “Management accounting”

Answer 1

Field of accounting that provides economic and financial information for managers
and other internal users

Question 2

Comparison of financial accounting and managerial accounting

Similarities:
○

Answer 2

Comparison of financial accounting and managerial accounting

Similarities:
○ Both deal with economic events of a business

Question 3

Managers’ activities/responsibilities classified into … broad functions:

1.

○
○

2. 3.

Answer 3

Managers’ activities/responsibilities classified into … broad functions:

1. Planning: look ahead and plan objectives

○ Objectives: maximizing short-term profits/market share, maintaining
commitment to environment protection, etc
○ Key objective of management: add value to business under its control, usually
measured by the trading price of company’s shares and potential selling price
of the company

2. Directing: coordinating company’s activities and human resources to produce
   smoothly running operation
3. Controlling: process of keeping company’s activities on track

Question 4

Organizational structures

Organization charts:

●
●
●
● CFO: … Supported by

○
○

○

●

Answer 4

Organizational structures

Organization charts: show interrelationships of activities and delegation of authority and
responsibility within the company

● Shareholders: own corporation, manage it indirectly
● Board of directors: elected by shareholders to manage corporation , creates operating policies, selects officers
● CEO: has overall responsibility
● CFO: responsible for accounting/finance issues. Supported by

○ Controller: responsibilities include (1) maintaining accounting records, (2)
maintaining system of internal control, (3) preparing financial statements, tax
returns, and internal reports
○ Treasurer: has custody of corporation’s funds, responsible for maintaining
company’s cash position

○Internal audit staff: review reliability/integrity of financial; information
provided by controller and treasurer

● Vice president of operations: overseas employees with line positions

Question 5

Organizational structures

Responsibility is classified as either:

1. 2.

Answer 5

Organizational structures

Responsibility is classified as either:

1. Line position : directly involved in company’s main revenue-generating operating
   activities
2. Staff position: involved in activities that support the efforts of the line employees

Question 6

Business ethics

●

● Corporate social responsibility:

○ Triple bottom line:

○ Sustainable business practices issues:

■
■
■

Answer 6

Business ethics

● Creating proper incentives

● Corporate social responsibility: company efforts to employ sustainable business
practices with regard to its employees and the environment

○ Triple bottom line: evaluation of company’s social responsibility performance
with regard to people, planet and profit

○ Sustainable business practices issues:

■ Deciding what items are to be measures (usually ones that are most important to stakeholders)
■ Deciding measurable attributes for each item
■ Consider materiality of the item, cost of measuring attributes, reliability of measurements

Question 7

● Code of ethical standards:

○ Canada:
○ U.S

■
■

○ U.S IMA ..

■ … provides the following codes of conduct regarding … :

● …: …
● …: ….
●…:…
●…: …

Answer 7

● Code of ethical standards:

○ Canada: each province has its own code of ethics and rules and guidelines of
professional conduct
○ U.S Sarbanes-Oxley Act of 2002 (SOX)

■ clarified top management’s responsibility for the company’s financial
statements
■ companies now pay more attention to the composition of the board of
directors

○ U.S IMA Standards of Ethical Conduct for Practitioners of Management
Accounting and Financial Management

■ The IMA’s Statement of Ethical Professional Practice provides the
following codes of conduct regarding competence, confidentiality,
integrity, and credibility :

● Competence: maintain professional competence, perform
professional duties corresponding to relevant laws, regulations
and technical standards, prepare complete/clear
reports/recommendations, communicate professional
limitations that would preclude responsible judgement or
successful performance of an activity.
● Confidentiality: refrain from disclosing confidential
information, inform subordinates as to how to handle
confidential information, refrain from using confidential
information for unethical or illegal advantage.
● Integrity: avoid conflicts of interest, refrain from activity that
would prejudice their ability to carry out their duties ethically,
refrain from engaging in or supporting any activity that would
discredit the accounting profession.
● Credibility: communicate information fairly and objectively,
disclose fully all relevant information that could reasonably be
expected to influence a user’s understanding of the reports,
comments, and recommendations presented.

Question 8

Managerial accounting today

● …industry trends: Canadian and U.S economies generally shifted toward
…
● Managerial accounting practices

○ Focus on …: all activities associated with providing a product or
service
○ Technological change:

■…
■ …

○ Just-in-time inventory (JIT) methods:…
○ Quality:

■ … systems to reduce defects in finished products. The goal is to achieve zero defects

○ ….: method of allocating overhead based on each
product’s use of activities. PROS: accurate product costing, careful scrutiny of
all activities in value chain
○ Theory of constraints: …

■ Bottlenecks: ….

○ Lean manufacturing: ….

■ 5 basic principles: ….

○ Balanced scorecard: …

Answer 8

Managerial accounting today

● Service industry trends: canadian and U.S economies generally shifted toward
providing services instead of goods
● Managerial accounting practices

○ Focus on value chain: all activities associated with providing a product or
service
○ Technological change:

■ Enterprise resource planning (ERP) software systems : SAP; provide
information used to manage all major business processes, from
purchasing to manufacturing to recording human resources
■ Computer-integrated manufacturing (CIM): manufacture products that
are untouched by human hands

○ Just-in-time inventory (JIT) methods: goods are manufactured or purchased
just in time for use.
○ Quality:

■ Total quality management (TQM): systems to reduce defects in
finished products. The goal is to achieve zero defects

○ Activity-based costing (ABC): method of allocating overhead based on each
product’s use of activities. PROS: accurate product costing, careful scrutiny of
all activities in value chain
○ Theory of constraints: The practice of identifying constraints that impede a
company’s ability to provide a good or service, and dealing with the
constraints to maximize profitability.

■ Bottlenecks: constraints that limit company’s potential profitability
○ Lean manufacturing: eliminates waste and concentrates on needs of customer
■ 5 basic principles: identify value stream, create flow, respond to
customer pull or demands, aim for perfection

○ Balanced scorecard: performance-measurement approach that uses both
financial and non-financial measures to evaluate all aspects of a company’s
operations in an integrated way.

Question 9

Accounting organizations and professional accounting careers in canada

●
●
●

Answer 9

Accounting organizations and professional accounting careers in canada

● Chartered accountant (CA)
● Certified management accountants (CMA)
● Certified general accountants (CGA)