OBJECTIVES, ROLE AND SCOPE OF MANAGEMENT ACCOUNTING

Management Accounting Review

/RCROQUE

Test 1. TRUE OR FALSE QUESTIONS. (FALSE = RED)

________ 1. Management accounting places less emphasis on precision and more emphasis on
flexibility and relevance than financial accounting.
________ 2. Management accounting is not governed by generally accepted accounting principles
(GAAP).
________ 3. Financial accounting and management accounting reports must be prepared in
accordance with generally accepted accounting principles (GAAP).
________ 4. When carrying out their directing and motivating activities, managers mobilize the
organization's human and other resources so that the organization's plans are carried
out.
________ 5. When carrying out planning activities, managers rely on feedback to ensure that the plan
is actually carried out and is appropriately modified as circumstances change.
________ 6. When carrying out their directing and motivating activities, managers select a course of
action and specify how the action will be implemented.
________ 7. Persons occupying staff positions provide support and assistance to other parts of the
organization.
________ 8. Staff departments generally have direct authority over line departments in an
organization.
________ 9. Informal relationships and channels of communication often develop that do not appear
on the organization chart.
________ 10. The controller's position in a retail company is considered a line position rather than a
staff position.
________ 11. The chief financial officer of an organization should present facts and refrain from offering
advice and personal opinion.
________ 12. A strategy is a game plan that enables a company to attract customers by distinguishing
itself from competitors.
________ 13. Management accounting generally focuses on reporting information about the enterprise
in its entirety rather than by sub-units.
________ 14. There are no rules and regulations associated with management accounting since the
information is intended solely for use within the firm.
________ 15. Management accountants are primarily found at the higher levels of the organizational
hierarchy.
________ 16. Cross-functional teams involve bringing together individuals from a variety of different
fields (marketing, design, accounting, production, purchasing, and human resources) for
an "interdisciplinary approach" to addressing management issues.
________ 17. The day-to-day work of management teams will typically comprise planning, decision-
making, controlling, directing operational activities and cost minimizing.
________ 18. Decision-making involves a detailed financial and operational description of anticipated
operations.
________ 19. Planning is the function that is the most directly related to management by objectives.
________ 20. When carrying out their directing and motivating activities, managers select a course of
action and specify how the action will be implemented.
________ 21. When carrying out controlling activities, managers rely on feedback to ensure that the
plan is actually carried out and is appropriately modified as circumstances change.
________ 22. Economic events are the raw data for financial accounting but not for management
accounting.
________ 23. Generally accepted accounting principles (GAAP) govern both financial accounting and
management accounting.
________ 24. Management accounting places more emphasis on precision and less emphasis on
flexibility and relevance than financial accounting.
________ 25. Since there are few rules to restrict how an organization chooses to arrange its own
internal data for decision-making, management accounting provides ample opportunity
for creativity and change.
________ 26. Management accounting is a subset of both cost and financial accounting.
________ 27. The cost concept is fundamental in both management and financial accounting, that is,
they both make use of different cost concepts for different purposes.
________ 28. Management accounting information includes both historical and estimated data.
________ 29. A staff department or unit is one that provides services, assistance, and advice to the
departments with line or other staff responsibilities.
9
________ 30. Line departments generally have direct authority over staff departments in an
organization.
________ 31. Deciding the best level of inventory to be maintained is normally performed by
management accountants.
________ 32. The corporate treasurer is the officer responsible for the firm’s accounting activities, such
as corporate accounting, tax management, financial accounting, and cost accounting.
________ 33. The corporate controller is the officer responsible for the firm’s financial activities such as
financial planning and fund raising, making capital expenditure decisions, and managing
cash, credit, the pension fund, and foreign exchange.
________ 34. The corporate treasurer’s focus tends to be more external, while the controller’s focus is
more internal.
________ 35. A controller normally assumes a narrow role within the organization, often preventing the
individual's rise to top management ranks.

Test 2. MULTIPLE CHOICE QUESTIONS.

1. Manage accounting places considerable weight on

A. Generally accepted accounting principles.
B. The financial history of the entity.
C. Ensuring that all transactions are properly recorded.
D. Detailed segment reports about departments, products, and customers.

2. The plans of management are often expressed formally in

A. Financial statements. C. Budgets.
B. Performance reports. D. Ledgers.

3. Which of the following managerial functions involves a detailed financial and operational description
of anticipated operations?
A. Planning
B. Measuring
C. Controlling
D. Decision making

4. The phase of accounting concerned with providing information to managers for use in planning and
controlling operations and in decision-making is called
A. Throughput time C. Financial accounting.
B. Management accounting. D. Controlling.

5. A staff position
A. Relates directly to the carrying out of the basic objectives of the organization.
B. Is supportive in nature, providing service and assistance to other parts of the organization.
C. Is superior in authority to a line position.
D. None of the choices.

6. For a manufacturing company, what type of position (line or staff) is each of the following?

Manager of a Data Processing Department Manager of a Production Department

A. Staff Staff
B. Staff Line
C. Line Staff
D. Line Line

7. A _______________ position in an organization is directly related to the achievement of the

organization's basic objectives.
A. Line C. Staff
B. Management D. None of the choices.

8. ______________ is an example of a line position.

A. Controller for a merchandising C. Store manager for Best Buy
company D. Human resources manager for a
B. Chief financial officer of a community college
merchandising company

9. The process of creating a formal plan and translating goals into a quantitative format is

10
 A. Budgeting. D. Value-added analysis.
B. Benchmarking. E. Activity-based costing.
C. Cost-benefit analysis.

10. The field of accounting that depends on generally accepted accounting principles (GAAP) is called
A. Cost accounting. D. Responsibility accounting.
B. Financial accounting. E. International accounting.
C. Management accounting.

11. Which field of accounting emphasizes relevance over comparability?

A. Cost accounting. C. Responsibility accounting.
B. Financial accounting. D. International accounting.

12. Management accounting is an integral part of the management process. As such, it provides
essential information for the following objectives, except
A. Maintaining the current level of resource utilization as well as internal and external
communication.
B. Measuring and evaluation of performance.
C. Planning strategies and controlling current activities of the organization.
D. Enhancing objectivity in decision-making.

13. In order to be useful to managers, management accounting reports should possess all of the
following characteristics, except
A. Be provided at any time management needs information.
B. Provide objective measures of past operations and subjective estimates about future decisions.
C. Be prepared in accordance with generally accepted accounting principles.
D. Be prepared to report information for any unit of the business to support decision-making.

14. Which of the following statements about management accountants is false?

A. In a number of companies, management accountants make significant business decisions and
resolve operating problems.
B. An increasing number of organizations are segregating management accountants in separate
management accounting departments.
C. Management accountants often are part of cross-functional teams.
D. Management accountants more and more are considered "business partners."

15. Management accounting places considerable focus on

A. The financial history of the business.
B. Generally accepted accounting principles (GAAP).
C. Ensuring that all transactions are properly recorded.
D. Detailed segment reports about departments, products, and customers.

16. The concept of “management by exception” refers to management’s

A. Consideration of only rare events.
B. Considerations of items selected at random.
C. Ignorance of the reasons of variations from standards.
D. Consideration of only those items which vary materially from plans.

17. Which activity is normally performed by management accountants?

A. Assisting managers to interpret data in management accounting reports.
B. Designing systems to provide information for internal and external reports.
C. Gathering data from sources other than the accounting system.
D. All of the choices.

18. Romy Company has set various goals, and management is now taking appropriate action to ensure
that the firm achieves these goals. One is to reduce outlays for overhead, which have exceeded
budgeted amounts. Which of the following functions best describes this process?
A. Decision-making
B. Planning
C. Controlling
D. Organizing

9
19. Which of the following is not an objective of management accounting?
A. Providing information for decision-making and planning
B. Assisting in directing and controlling operations
C. Motivating managers toward the organization's goals
D. None of the choices.

20. The process of encouraging and authorizing workers to take appropriate initiatives to improve the
overall firm is commonly known as
A. Employee empowerment.
B. Planning and control.
C. Decision-making.
D. Problem recognition and solution.

21. What term is used to describe the process of developing the organization’s objectives and goals?
A. Supervising
B. Decision-making
C. Planning
D. None of the choices.

22. To distinguish between management accounting and financial accounting, the following statements
are correct, except
A. Financial accounting is bound by generally accepted accounting principles (GAAP) while
management accounting need not to conform to GAAP.
B. Financial accounting can be regarded as the process while management accounting can be
regarded as the product of that process.
C. Management accounting, in view of its various integrated recipients, should have a separate
data recording and retrieval system from financial accounting.
D. Management accounting output must be released on time so as not to erode its usefulness;
financial accounting output can still be used even when delayed.

23. Which of the following would likely be considered an internal user of accounting information rather
than an external user?
A. Lenders
B. Stockholders
C. Consumer groups
D. Middle-level managers

24. The person most likely to use management accounting information is

A. Government taxing authority.
B. Shareholders.
C. Assembly department supervisor.
D. Lenders.

25. Which of the following is most associated with financial accounting?

A. Can have both objective and subjective information.
B. Prepared in accordance with generally accepted accounting principles (GAAP).
C. Can be prepared periodically, or as needed.
D. Can be prepared for the entity or segment.

26. Which of the following statements is false?

A. There is an overlap between financial and management accounting.
B. Management accounting does not need to conform to generally accepted accounting principles
(GAAP).
C. Management accounting sometimes relies on past information.
D. None of the choices.

27. Which of the following influences the frequency of an internal report?

A. The wishes of the managers receiving the report
B. The frequency with which decisions are made that require the information in the report
C. The cost of preparing the report
D. All of the choices.

28. The following are among the controller’s traditional functions, except
A. Tax management.
B. Financial reporting and interpretation.
C. Credit management.
D. Planning for control.

10
29. Which of the following is not a function of the treasurer?
A. Safeguarding assets
B. Managing investments and the related interest and dividend income
C. Computation of the amount of taxes to be paid
D. Being responsible of an entity’s credit policy

30. All of the following are correct concerning line and staff position functions, except
A. Both line and staff position functions are depicted on the organization chart.
B. Line functions are directly related to the basic objectives of an organization.
C. Persons occupying staff functions have authority over persons occupying the functions.
D. None of the above.

31. Which type of authority do management accountants generally exercise?

A. Functional
B. Company
C. Line
D. Staff

32. A controller is normally involved with

A. Managing investments.
B. Safeguarding assets.
C. Managing the firm's credit policy.
D. Preparing financial statements.

33. Which of the following statements is false?

A. Customer satisfaction is an example of financial information.
B. Organizational leadership plays a critical role in fostering an organization’s culture of high
ethical standards.
C. Information is never neutral, just the act of measuring and reporting information affects the
individuals involved.
D. Management accounting gathers short-term, long-term, financial and non-financial information.

34. Which of the following statements refers to financial accounting information?

A. The reports are generally delayed and historical.
B. The audience tends to be shareholders, creditors, and tax authorities.
C. The scope tends to be highly aggregate.
D. All of the choices.

35. The professional certification most relevant for management accountants is the
A. CMA.
B. CPA.
C. CSA.
D. MAS

11