Chapter 1: What Is Managerial Accounting

Question 1

___ focuses on providing historical financial information to external users including owners/shareholders and creditors.

Answer 1

Financial accounting

Question 2

___ accounting follows a set of rules provided by GAAP

Answer 2

Financial

Question 3

___ focuses on internal users including executives, product managers, sales managers, etc. by making future projections for segments of a company with detailed projections for sales, costs, and resulting profits (or losses) at a high level of detail, but doesn’t not provide detailed information about each product.

Answer 3

Managerial accounting

Question 4

___ accounting uses non-financial measures such as percentage of defective products or percentage of on-time deliveries to customers.

Answer 4

Managerial

Question 5

Two important functions that enable management to continually plan for the future and assess implementation are called ___ and ___.

Answer 5

Planning and control

Question 6

___ is the process of establishing goals to employees of the organization, income and expense goals, and helps to identify any deviations from these goals.

Answer 6

Planning

Question 7

___ is the process of evaluating whether the organizations plans were implemented effectively in the planning process and leads to refined goals in the future.

Answer 7

Control

Question 8

F. How do organizations formalize their strategic plans?

Answer 8

Creating a budget

Question 9

What are the different forms of a budget?

Answer 9

Budgeted income statement
Capital budget
Cash flow budget

Question 10

___ indicates a profit plan for the future.

Answer 10

Budgeted income statement

Question 11

___ shows the long-term investments planned for the future.

Answer 11

Capital budget

Question 12

___ outlines cash inflows and outflows for the future.

Answer 12

Cash flow budget

Question 13

Organizational structure:

1. Board of Directors
2. ___
   3: VP and ___
   4: ___, ___, and ___
   5: Managerial accountant, financial accountant, and ___

Answer 13

2: CEO
3: CFO
4: Controller, treasurer, and internal auditor
5: Tax accountant

Question 14

___ is in charge of the organizations finance and accounting functions, oversees all accounting and finance personnel, and reports directly to the CEO.

Answer 14

CFO

Question 15

___ is responsible for managing the accounting staff such as the managerial accountant, financial accountant, and tax accountant.

Answer 15

Controller

Question 16

*The ___ accountant prepares information used for decision making within the organization including operational budgets, cost estimates for existing products, budgets for new product lines, and profit and loss reports by division.

Answer 16

Managerial

Question 17

The ___ accountant prepares financial information, in accordance with GAAP, for those outside the company including the quarterly reports 10Q and annual reports 10K.

Answer 17

Financial

Question 18

The ___ accountant prepares tax reports for government agencies including the IRS.

Answer 18

Tax

Question 19

___ obtains sources of financing for the organization, projecting cash flow needs, and managing cash and short-term investments (financial decisions).

Answer 19

Treasurer

Question 20

The ___ confirms that the company has controls that ensure accurate financial data, and verifies the financial information provided by accountants.

Answer 20

Internal auditor

Question 21

In the event of a conflict with the CFO, and internal auditor can report directly to ___.

Answer 21

Board of directors OR audit committee

Question 22

An organizations structure depends upon ___ and ___.

Answer 22

Size and reporting requirements

Question 23

What standards have been established to help guide accounting professionals through ethical dilemmas?
What are the four core responsibilities?

Answer 23

The IMA (institute of managements accountants) 
Core: competence, confidentiality, integrity, and credibility

Question 24

Resolution of Ethical Conflict: What are the five steps?

Answer 24

1. Follow policies of organization regarding ethical conflicts
2. If following organizations policies does not effectively resolve the conflict, discuss with immediate supervisor unless he/she is involved
3. If the immediate supervisor cannot reach satisfactory resolution, it should be presented to the next higher managerial level
4. If all higher levels of management do not reach a satisfactory resolution, board of directors, owners, etc may have acceptable reviewing authority
5. Another option includes an objective advisor, I.e., IMA

Question 25

An ___ is designed to record and share information across functional areas and across geographical areas and provide real time data to all users.

Answer 25

ERP (enterprise resources planning system)

Question 26

When deciding on an ERP system, what should happen?

Answer 26

Benefits of using the system should outweigh the cost of implementing

Question 27

___ are all costs related to the production of goods and can be further classified as DM, DL, and MFO

Answer 27

Manufacturing costs

Question 28

___ are materials used in production which are easily traced to a product.

Answer 28

DM

Question 29

F. ___ includes the workers who convert materials into a finished product and whose time can easily be traced to a product.

Answer 29

DL

Question 30

___ are all costs associated with the production process other than DM and DL and are further classified as indirect materials, indirect labor, and others (insurance, utilities, depreciation, maintenance).

Answer 30

MFO

Question 31

___ include glue, paint and screws

Answer 31

Indirect materials

Question 32

___ include production supervisors who oversee several different product lines.

Answer 32

Indirect labor

Question 33

___ are costs that are not related to the production of goods which are further classified as selling costs and GandA costs and are expensed ___.

Answer 33

Non-manufacturing/period costs

During the period incurred

Question 34

___ are costs incurred to obtain customer orders and provide customers with a finished product which include advertising, sales commission, salaries for marketing and advertising personnel, etc.

Answer 34

Selling costs

Question 35

F. *___ are costs related to the overall management of an organization which include accounting, HR, legal, executive, and IT

Answer 35

General and Administrative costs

Question 36

Manufacturing/product costs include ___ and are expensed ___ .

Answer 36

DM, DL, and MFO

When goods are sold

Question 37

Three inventory accounts:

Answer 37

Raw materials
Work-in-process
Finished goods

*each an asset account on the balance sheet

Question 38

___ is an expense account on the income statement that represents the cost of all goods sold in the period.

Answer 38

COGS

Question 39

___ companies buy and sell goods, but typically do not manufacture goods..

Answer 39

Merchandising

Question 40

___ companies produce and sell goods.

Answer 40

Manufacturing

Question 41

F. Cost Flow Equation:

Answer 41

Inventory beginning + purchases - inventory ending = COGS

Beginning balance (BB)
+ transfers in (TI)
- ending balance (EB)
= transfers out (TO)

Question 42

quiz: ___ is a field of accounting that provides economic and financial information for internal users.

Answer 42

Managerial accounting

Question 43

quiz: ___ are costs that are a necessary and integral part of producing the finished product.

Answer 43

Product costs

Question 44

quiz: ___ is work of factory employees that has no physical association with the finished product, or it is impractical to trace the costs to the goods produced.

Answer 44

Indirect labor

Question 45

quiz: ___ are costs that are matched with the revenue of a specific time period and charged to expense as incurred.

Answer 45

Period costs

Question 46

quiz: ___ is work of factory employees that can be physically and conveniently associated with converting raw materials into finished goods.

Answer 46

Direct labor

Question 47

quiz: Indicate how each of the following costs should be classified: Advertising

Answer 47

Period costs

Question 48

quiz: Indicate how each of the following costs should be classified: Factory supervisor’s salary

Answer 48

MFO

Question 49

quiz: Indicate how each of the following costs should be classified: Wages paid to assembly-line workers who install interiors in automobiles.

Answer 49

DL

Question 50

quiz: Indicate how each of the following costs should be classified: Salary paid to mechanics who maintain and repair factory equipment.

Answer 50

MFO

Question 51

quiz: Indicate how each of the following costs should be classified: Supplies for the general office.

Answer 51

Period costs

Question 52

quiz: Indicate how each of the following costs should be classified: Utility cost for the store

Answer 52

Period costs

Question 53

quiz: Indicate how each of the following costs should be classified: Rubber latex purchased for the use in the manufacture of automobile tires.

Answer 53

DM

Question 54

quiz: Indicate how each of the following costs should be classified: Rent on factory equipment.

Answer 54

MFO

Question 55

quiz: Indicate how each of the following costs should be classified: Salary paid to the company’s chief executive officer.

Answer 55

Period costs

Question 56

quiz: Financial and managerial accounting are similar in that both:

a. have the same primary users.
b. have reports that are prepared quarterly and annually.
c. deal with the economic events of an enterprise.
d. produce general-purpose reports.

Answer 56

c. deal with the economic events of an enterprise.

Question 57

*quiz: Product costs are expenses on the income statement when:

a. raw materials for the product are purchased.
b. the order is received for the product.
c. the product is sold.
d. the product completes the manufacturing process.

Answer 57

c. the product is sold.