Chapter 1 Overview of Managerial Accounting

Question 1

managerial accounting

Answer 1

ctives of Managerial Accounting
Management accountants are professionals who work in business, across all areas of an or-
ganization, in decision support, planning, and control functions. They partner with personnel
from their firm’s executive management to its line employees to make strategic business de-
cisions. Management accountants must capture, analyze, and report critical data in a timely
manner. To address important strategic questions like those mentioned previously, manage-
ment accountants will identify data needed to answer those questions. Such data will usually
include financial information but often include non-financial information from both inside
and outside the company. If the necessary data aren’t readily available, management accoun-
tants may help design systems to capture the data. Sometimes, the data are available but must
be summarized in a form that is useful to management. Management accountants can use data
visualization tools such as Alteryx and Tableau to develop reports that allow management to
make sense of the data. They are also proactive in identifying relevant information to help
recommend needed improvements in all aspects of their firm’s business.

Question 2

Financial accounting

Answer 2

focuses on reporting a company’s financial performance to
external
parties. Financial accoun-
tants are typically engaged in measuring and reporting the financial results of a business’s
past
actions and activities. They report the results of past transactions in accordance with a set of
standards known as generally accepted accounting principles (GAAP). Financial accountants
typically produce reports such as 10-Qs and 10-Ks (for regulators of publicly traded compa-
nies); Annual Reports (for investors and creditors); and, periodic income statements, balance
sheets, and cash flow statements (for management).
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Question 3

manufacturing firms

Answer 3

Manufacturing firms
are companies that convert materials such as sheets of
steel and coils of wire and components such as electric motors and micropro-
cessors into finished products. The manufacturer utilizes human labor; utilities
such as electricity, natural gas, and water; and factory assets such as buildings,
machinery, and computers to convert the materials and components into sellable products.
Manufacturers will normally report three types of inventory on their balance sheets: raw
materials inventory, work-in-process inventory, and finished goods inventory.

Question 4

merchandising firms

Answer 4

Merchandising firms
are companies that purchase finished products from manufacturers
for warehousing, display, and sale to consumers. Wholesalers typically buy finished products in
large quantities and store them in large warehouses until they can be sold and shipped in smaller
quantities to local retailers. The retailer utilizes human labor or electronic advertising to sell
products from a “brick-and-mortar” store or through an online store available through a website.
Because merchandising firms purchase finished products for sale, they typically report a single
type of inventory on their balance sheets: finished goods or merchandise inventory.

Question 5

E. S. G.

Answer 5

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE
Being a good corporate citizen means more than just providing large returns to a company’s sharehold-
ers; it means considering all the company’s stakeholders. In addition to shareholders, other stakeholders
include employees, customers, suppliers, the environment, and the community—essentially, all of society.
But does a company have to sacrifice shareholder returns in order to provide for these other stakehold-
ers? Enlightened companies are learning that the answer is no. In fact, providing for all stakeholders can
enhance shareholder return

Question 5

service firms

Answer 5

Service firms
are companies that provide services to customers. Examples include com-
panies in health care, legal, and accounting services. The types of costs incurred by these
firms are generally similar to those of other types of firms except they don’t sell a product.
Hence, they normally do not carry a raw materials and finished goods inventory. However, if
the services provided take many months or years to complete, i.e., project-based services, a
service firm could report work-in-process inventory on its balance sheet.

Question 6

Data analytics

Answer 6

Data analytics (DA)
can broadly be defined as the process of
examining sets of data with the goal of discovering useful information
from patterns found in the data. Accountants employing data analytics
can glean important insights from a company’s data and identify areas
where opportunities for innovation exist.

Question 7

sustainability

Answer 7

Sustainability
means meeting our needs without compromising the ability of future generations
to meet theirs

Question 8

Stand alone automation
( Factory automation)

Answer 8

Factory automation is a widely recognized trend in modern manufacturing facilities. Fac-
tory automation exists in many forms.
Stand-alone automation
incorporates a robot or
computer-controlled machine into an existing manufacturing process to perform a single
function, such as welding. Stand-alone automation is usually undertaken to reduce both
labor and material costs

Question 9

Flexible-manufacturing-system automation
Factory automation

Answer 9

Flexible-manufacturing-system automation
involves multiple
cells of two or more automated machines. All of the machines in each
cell are controlled by a computer. The machines in each cell are intercon-
nected to allow an automated flow of product through the
manufactur-
ing cell

Factory automation is a widely recognized trend in modern manufacturing facilities. Fac-
tory automation exists in many forms.