What is Management Accounting?

Question 1

What is management accounting? (give an example)

Answer 1

It provides information for managers of an organisation who direct and control its operations (internal use) - Decision making, devising plans and performance management

Question 2

What is financial accounting?

Answer 2

It provides information to stockholders, creditors and others who are outside the organisation (external use)

Question 3

What is the main difference between management and financial accounting?

Answer 3

The presentation

Question 4

What does management accounting operate between?

Answer 4

Tactical management and operational management

Question 5

What are the responsibilities for managers in management accounting?

Answer 5

Planning, direct and motivating, decision making and controlling

Question 6

What is the important phrase to remember in management accounting?

Answer 6

Information for control and decision making

Question 7

What is information for control and decision making?

Answer 7

It is used to inform managers who can make decisions on a day-to-day basis. It can entail monetary and non-monetary information

Question 8

What is planning?

Answer 8

Maximising products and budgeting. It is the first level of management.

Question 9

What does the planning process affect?

Answer 9

It affects revenue and costs which are essential to the organisation

Question 10

What is directing and motivating?

Answer 10

It involves mobilising people to implement a plan and motivating and effectively directing people. It is also the tactical level.

Question 11

What is controlling?

Answer 11

It is concerned with ensuring the plan is being followed, e.g. providing feedback and identifying potential problems and opportunities. It also feeds back to the first stage (planning)

Question 12

What is the planning and control cycle?

Answer 12

It is a 4 stage process where decision making crosses across all four parts of the decision process

Question 13

What are the differences between users in financial and management accounting?

Answer 13

Financial: external users make financial decisions.
Management: managers who plan and control

Question 14

What are the differences between time focus in financial and management accounting?

Answer 14

Financial: Historical perspective.
Management: Future emphasis.

Question 15

What are the differences between data in financial and management accounting?

Answer 15

Financial: Emphasis on verifiability
Management: Emphasis on relevance for planning and control

Question 16

What are the differences between precision vs timeliness in financial and management accounting?

Answer 16

Financial: Emphasis on precision
Management: Emphasis on timeliness

Question 17

What are the differences between subject in financial and management accounting?

Answer 17

Financial: Primary focus on whole organisation
Management: Focuses on segments of organisation

Question 18

What are the differences between requirements in financial and management accounting?

Answer 18

Financial: Must follow formats (IFRS)
Management: Doesn’t need to follow any formats

Question 19

What are the characteristics of management accounting?

Answer 19

Emphasis on the future, relevance and flexibility of data, less emphasis on precision, segments of an organisation and not mandatory/no standards/not governed

Question 20

What is decision making?

Answer 20

An integral part in managerial skill which involves selecting a course of action from competing alternatives