Management Accounting

Question 1

what are the two types of accounting?

Answer 1

financial and management

both overlapping terms of their main purpose (accounting) but their focus is difference they serve different user needs

Question 2

what is accounting?

Answer 2

measuring, recording and communicating financial information

allows managers to monitor, plan and control activities of the business

Question 3

who are the main users of accouting?

Answer 3

customers, competitors, employees, government, community, investment analysis, suppliers, lenders, managers and shareholders

Question 4

what is fincianical accounting?

Answer 4

keeps track of a company’s financial transactions

• Using standardized guidelines, the transactions are recorded, summarized, and presented in a financial report or financial statement such as an income statement or a balance sheet
• statuary accounts

Question 5

what is meant by statuary accounts in fincanial accouting?

Answer 5

they have to be produced and shown to the public

Question 6

what is meat by stewardship in accounting?

Answer 6

the directors / managers prepare finical reports in order to communicate back / for the purpose of shareholders

(the people who own it don’t run it)

Question 7

what is financial accounting governed by?

Answer 7

Companies Acts (1985, 2006) and international accounting standards (IAS)

no real flexibility in how you conduct it

Question 8

what is the purpose of financial accounting?

Answer 8

‘to supply information on which decision can be based’

• info that is needed in order to make sound economic decisions
• provide information to the companies external users (tax, investors and creditors)

Question 9

what is financial accounting based on?

Answer 9

past information

financial results that the company has already achieved

Question 10

what are the important attributions of financial accouting?

Answer 10

• relevant
• timely
• objective
• unbiased
• comparable
• faithfully represented

auditors can come in and do the accounts to produce a faithful view of company

Question 11

what does financial accounting report on?

Answer 11

profitability and effcnecy of the business

results of an entire business, but not the systems in which are used to make such profit just the outcome

Question 12

what is the reporting focus of FA?

Answer 12

orientated toward the creation of financial statements, which are distributed within and outside of the company

Question 13

when is FA done?

Answer 13

FA requires that financial statements be done following the end of an accounting period

Question 14

what does FA do in terms of valuation?

Answer 14

addresses proper valuation of assets and liabilities,

Question 15

what is management accounting?

Answer 15

the provision of information to help management

process of analysing business costs and operations to prepare internal financial report, records, and account to aid managers decison making processes

Question 16

how does MA helps managers?

Answer 16

helps them to:

• formulate policy
• plan and control activities that are occurring
• make decisions through information gathered
• help performance improve, knowing will help
• remain efficient, collect info on how much each department has spent
• safeguard assets, protect and not waste what they have and not have

Question 17

what three activities does MA help managers do?

Answer 17

• planning
• control
• decision making

Question 18

what does MA report on?

Answer 18

more detailed level such as profits by product product line customer and geographic region

Question 19

what is the difference between MA and FA in terms of efficiency?

Answer 19

MA reports on specifically what is causing problems within company and how they could be fixed

FA profitability

Question 20

why is FA more objective than MA?

Answer 20

MA frequently deals with estimates, rather than proven and verifiable facts

Question 21

who does MA report to?

Answer 21

internal users

operational reports which are only distributed within a company

Question 22

are there any standards involved with MA?

Answer 22

no

Question 23

how is MA linked to bottleneck operations?

Answer 23

in that operations maybe already doing full capacity so hard to increase, MA tries to identify bottleneck and resolve them

Question 24

what time period is MA?

Answer 24

can be past and future as may address budgets and forecasts and so can have a future orientation

Question 25

is MA done very accounting period?

Answer 25

may issue reports much more frequently, since the information it provides is of most relevance if managers can see it right away

Question 26

does MA value assets and liabilities?

Answer 26

no it only deals with their productivity

Question 27

what is the framework for managerial planning, decison making and control?

Answer 27

1) identify objetives (plan)
2) search for alternative courses of action (plan)
3) gather data about alternatives (plan)

4) elect courses of action (decision making)
5) implement decision (decision making )

6) compare actual and planned outcomes (control)
7) reposed to divergences from plan (control)

Question 28

what is involved with planning (1-3) MA

Answer 28

• establish aims and objectives for suture directions of business (the what)
• develop strategies for business ( the how)
• produce detailed plans and targets (budgets)
• timing is vital

Question 29

what is involved with decison making (4-5) MA

Answer 29

Pricing - standard products and special orders / quantity and payment orders

evaluation of alternatives - make or buy (insource vs outsource) / development of new products / discontinuation of existing products

allocation of resources - establish priorities for current expenditure (more advertising and less training?) / allocate scarce resources

Question 30

how can managers reposed to divergences?

Answer 30

2 possibilities in MA

• take corrective action to get actual outcomes to conform plans
• modify unrealistic plans

Question 31

why can managers not just use fincanical accounting?

Answer 31

it does not go into enough detail, needs to be broken down into profit per sector etc