Chapter 1 Terms

Question 1

Managerial accounting

Answer 1

s concerned with providing information to managers for use within the organization.

Question 2

Managerial: Users of Information

Answer 2

Managers, within the organization

Question 3

Financial Accounting :Users of Information

Answer 3

Interested parties, outside the organization

           							(i. e., stockholders, creditors, governmental 
           							agencies) .

Question 4

Managerial Accounting: Regulation

Answer 4

Not required and unregulated, since it is intended only for management.

Question 5

Financial Accounting: Regulation

Answer 5

Required and must conform to generally
intended only for management. accepted accounting principles (GAAP).
Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission.
Also IFRS.

Question 6

Managerial Accounting: Source of Data

Answer 6

The organization’s basic accounting system,
plus various other sources, such as rates of
defective products manufactured, physical
quantities of material and labor used in pro-
duction, occupancy rates in hotels and hos-
pitals, and average take-off delays in airlines.

Question 7

Financial Accounting: Source of Data

Answer 7

Almost exclusively drawn from the organi-
zation’s basic accounting system, which ac-
cumulates financial information.

Question 8

Managerial Accounting: Nature of Reports and Procedures

Answer 8

Reports often focus on subunits within the such as departments, divi- organization sions, geographical regions, or product
lines. Based on a combination of historical
data, estimates, and projections of future
events.

Question 9

Controller vs Treasurer

Answer 9

1. Supervises the accounting department 1. Manages relationships with donors
   creditors, investors, and government
   agencies that provide financial support.
2. Prepares all reports for external parties 2. Maintains custody of cash and other
   (financial accounting) assets (i.e., its credit policy)

3.   Prepares all reports and information for	3.   Manages investments--raises capital
      internal users (managerial accounting)	      

4. Assists line managers throughout the 4. Responsible for credit policy and collec-
   business in interpreting and using tion of accounts
   managerial accounting information.
5. Prepares reports required for taxation 5. Manages the business’ insurance coverage
   and governmental reporting: advises
   management on tax-related issues.

Question 10

The Foreign Corrupt Practices Act of 1977

Answer 10

requires publicly traded companies to have system of internal controls in place.
These companies are required to have a statement of
management’s responsibility for implementing good internal
controls.

Question 11

Five purposes of internal control.

Answer 11

To provide reliable data

		2. To safeguard the assets and records
3. To help provide for the efficiency and effectiveness of operations
		4. To ensure management policies are followed
		5. To ensure compliance with governmental mandates.

Question 12

SOX impact:

Answer 12

-Senior executive mgt. must certify financial statements—penalties include jail time.

 -Enterprises must have a Statement of Ethics which includes how infractions should be reported (hot-line, audit committee, etc.)

• Senior management must make assertions regarding system of internal control. Internal controls must be reliable and effective. Thus, they are under constant review.
• Increased independence of outside auditors.
• Increased responsibility of board of directors.

Question 13

IMA

Answer 13

Institute of Management Accountants has a Statement of Ethical Professional

Question 14

CMA

Answer 14

Certified Management Accountant) similar to the CPA (Certified Public Accountant).

Question 15

ERM

Answer 15

is enterprise risk management. Companies should identify risks before they occur rather than react to them later.

Question 16

CSR

Answer 16

is corporate social responsibility. Companies consider all stakeholders when making a decision.

Question 17

Financial Accounting: Nature of Reports and Procedures

Answer 17

Reports focus on the enterprise as a whole organization