Chapter 1 - Introduction

Question 1

Describe FOUR differences between financial and management accounting.

Answer 1

Management accounting focuses on the information required by the internal parties within an organisation. Financial accounting focuses on external reporting to meet the regulatory and legal reporting requirements.

Regulation by law and accounting standards. These obligations and restrictions do not apply to the cost and management accounts. However, external users require assurance that the financial statements are prepared in a way that makes them reliable, complete, and lacking in bias.

The amount of precision. Financial statements must conform to regulations and standards. On the other hand, there is a lot of approximation when it comes to Management accounting.

Degree of detail is higher in cost and management accounting. it focuses on individual cost elements, units, activities, processes and segments. Financial Statements focus of the organisation as a whole.

Time Dimension.
Report Frequency

Question 2

Why does the business require managerial accounting?

Answer 2

To assess the performance of:
1. Various units
2. Departments
3. Individuals

By comparing actual results with budget and targets, managers can identify areas for improvement and take corrective actions to enhance performance and productivity.