Managerial Accounting Chapter 1 Test Questions – Flashcards
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What are the three primary responsibilities?
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Planning Directing Controlling
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What does managerial accounting focus on?
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Providing internal management with information needed to run a company efficiently and effectively.
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What is Planning?
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setting goals and objectives for company and determining how to achieve them. Ex. Reducing labor costs by reducing store hours. -Generate more sale by opening new stores.
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What are Budgets?
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The translation of plans... the quantitative expression of a plan.
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What is Directing?
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Overseeing company's day-to-day operations. Ex. Using daily/weekly sales reports to adjust marketing strategies. -Using product cost reports to adjust raw material usage
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Managerial vs. Financial Accounting
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Primary users: M-Internal users managers. F-External users, creditors, stockholders, and gov. regulators. Purpose of Info: M-plan, direct, control operations and business decisions. F-help external users make investing & lending decisions. Primary Accounting Product: M-Internal accounting report. F-financial statements. Included in report & format: M-management decides when to report only if benefit of using report exceeds cost of preparing report. F-GAAP Underlying basis of Info: M-Focuses on future, provides info on external and internal transactions. F-historical transactions with external parties.
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Managerial vs. Financial Accounting
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Info characteristic emphasized: M-data must be relevant F-data must be reliable & objective. What business unit is report about: M-segments products, customers, geographical regions, departments, divisions. F-company as a whole. limited segment data provided in footnotes. How often are reports prepared: M-some daily , some only prepared one time up to manager. F-Annually, quarterly. Who verify info: M-no independent audits, company's internal audit function may. F-CPA's. Info required by outside group/gov. agency: M-No F-Yes SEC. Concern over reports affecting employee behavior: M-considers behavioral implications when designing system. F-Concern about adequacy of disclosure, behavioral implications are secondary.
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What are the Board of Directors?
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Elected by stockholders, oversee company.
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What does CEO do?
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manage company on a daily basis.
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What does COO do?
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Responsible for company's operations, such as Research and Development, production, and distribution.
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What does CFO do?
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Responsible for all of the company's financial concerns. The Treasurer and the Controller report directly to CFO.
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What does treasurer do?
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Responsible for raising capital through issuing stocks and bonds, and investing funds.
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What does controller do?
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Responsible for general financial accounting, managerial accounting, and tax reporting.
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What is an Internal Audit Function?
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Ensure company's internal controls and risk management policies are functioning properly. Reports directly to Audit Committee.
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What is Audit Committee?
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Oversees internal audit function as well as annual audit financial statements by CPAs.
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Why do the internal audit committee and CPAs report directly to the audit committee?
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Ensure that management will not intimidate them or bias their work.
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What causes the Roles of Management to change?
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Impact of Technology Ensuring accurate financial records Planning, analyzing, and interpreting accounting data Providing decision support
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Required Skills of Managerial Accountants
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Analytical skills, Microsoft Excel skills, Ability to work on a team, Written and Verbal communication, Business Knowledge, Accounting knowledge
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What is the Institute of Management Accountants functions?
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Professional association for management accountants in US. Mission: provide forum for research, practice development, education, knowledge sharing, and advocacy of the highest ethical and best practices in management accounting and finance.
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What does IMA issue?
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The Certified Management Accountant certification.
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What are the Ethical Standards?
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Competence- maintain professionalism Confidentiality- preserve info. Integrity- personal value of your name. Credibility- people trust you or believe you.
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What is Ethical Behavior?
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Doing the right thing regardless of consequences.
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What is Unethical Behavior?
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Manipulating income, Performing tasks not qualified to do, Allowing reimbursement of false expense report.
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Is Unethical Behavior always illegal?
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Unethical behavior isn't always illegal. Illegal behavior is always unethical.
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What is Sarbanes-Oxley Act (SOX)?
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Restore trust in publicly traded corporations, management, financial statements, and their auditors.
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What does SOX enhance?
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Enhance internal control and financial reporting requirements and establishes new requirements for publicly traded companies and their independent auditors.
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What are required for CEOs and CFOs by SOX?
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Financial statements must be signed, responsible for maintaining an adequate internal control structure and procedures, annual assessments of internal and financial reporting procedures.
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What does SOX require from audit committee?
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Must be independent, can't be employed by the company. Increases white collar crime penalties.
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What is the International Financial Reporting Standards? (IFRS)
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What every country besides the US uses. US uses GAAP.
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What is Extensible Business Reporting Language? (XBRL)
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Enables companies to release financial and business information in a format that can be quickly, efficiently, and cost effectively accessed, sorted, and analyzed over the internet. Coding system to TAG data.
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Advantages of XBRL
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Decreases retrieval time, Decreases conversion time, Facilities comparisons, Customizes information, More consistent use of financial terminology
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What is sustainability?
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Ability to continue operations while attempting to not harm the environment.
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What are the three Pillars of Sustainability?
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Environmental Social Economic
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What is the Triple Bottom Line? Profit People Planet
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recognizes a company's performance should be viewed not only in terms of economic profits for its owners but also by its impact on people and the planet.
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Shifting Economy
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Shift away from manufacturing moving toward service. Managerial Accounting has expanded
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Integrated reporting
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communication about an organizations strategy, governance, performance and prospects lead to creation of value over the short, medium and long term.
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What do traditional financial statements tend to focus on?
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Focus on short term financial measures of past performance.
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Competing in Global Marketplace
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Barriers to international trade have fallen, More accurate and timely information needed.
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What is Enterprise resource planning? (ERP)
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Used by large companies where systems can integrate all of a company's worldwide functions, departments and data. Ex. SAP, Oracle
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ERP Advantages
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Streamline operations, respond quickly to changes, Replace separate software systems.
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ERP Disadvantage
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Expensive
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What is Cost benefit analysis?
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Weighs the expected costs of taking an action against expected benefits of the action.
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What is Lean Thinking?
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A philosophy and a business strategy of operating without waste.
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Primary goal of Lean production system?
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Eliminate waste of time and money that accompanies large inventories.
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Advantages of Lean Operations
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Lowers costs Increases competitive position
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What is Just in Time? (JIT)
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Pioneered by Toyota. Manufacturing products just in time to fill customer orders, and no sooner. Ex. Nissan, Dell
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Advantages of JIT
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Reduces: Raw Materials inventory, Finished goods inventory, Storage costs, Handling costs
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What is throughput time?
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Time between buying raw materials and selling finished products, while maintaining high quality.
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Total Quality Management (TQM)
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Goal to provide customers with superior products and services. Continuously set higher goals for quality. Found a lot in Hospitals
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International Organization for Standardization (ISO)
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163 member countries. ISO 9001:2008 certified by complying with the quality management standards set forth by ISO. Every 6 years to get certified.
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What is Controlling?
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Evaluating results of business operations against the plan and making adjustments to keep towards its goals. Ex. Comparing budgeted sales with actual sales take actions when needed. -Comparing budgeted product costs against actual product costs take actions where needed.
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Management conducts variance analysis by comparing budget to actual.
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Controlling (comparing)
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Management uses information on product costs to determine sales prices.
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Directing (day to day)
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Management decides to increase sales growth by 10% next year.
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Planning
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To lower product costs, management moves production to Mexico.
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Controlling (know what product costs are), Planning (moving to Mexico)
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Management reviews hourly sales reports to determine the level of staffing needed to service customers.
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Directing (staffing needed)
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Main characteristic of data is that it must be reliable and objective.
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Financial
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Reports are prepared as needed.
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Managerial
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Not governed by legal requirements.
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Managerial
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Primary users are external (creditors; investors)
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Financial
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Focused on the future.
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Managerial
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Reporting is based mainly on the company as a whole.
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Financial
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Reports are usually prepared quarterly and annually.
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Financial
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Information is verified by external auditors.
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Financial
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Focused on the past.
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Financial
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Main characteristic of data is that it must be relevant.
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Managerial
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Reports tend to be prepared for the parts of the organization rather than the whole organization.
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Managerial
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Primary users are internal (company managers)
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Managerial
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Governed by GAAP or IFRS
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Financial
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Invest in company funds.
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Treasurer
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Report to the audit committee of the board of directors and to a senior executive, such as the CFO or CEO.
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Internal Audit
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Prepares company tax returns.
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Controller
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Perform cash counts at branch offices.
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Controller
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Prepare journal entries for month end closing.
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Controller
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Issue company stock
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Treasurer
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Ensure that the company's internal controls are functioning properly.
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Internal Audit
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Create an analysis about whether to lease or buy a delivery truck.
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Controller
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Calculate the cost of a product.
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Controller
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Issue company bonds
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Treasurer
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Check to make sure that company risk management procedures are being followed.
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Internal Audit
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Work with various departments in preparing operating budgets for the upcoming year.
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Controller
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Oversee accounts payable activities.
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Controller
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Raising capital and investing funds are the direct responsibilities of the ____.
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Treasurer
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Financial accounting, managerial accounting, and tax reporting are the direct responsibilities of the ____.
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Controller
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The internal audit function reports to the CFO or the ____ and the _____.
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CEO or Audit Committee
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The CEO is hired by the ____.
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Board of Directors
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The company's operations are the direct responsibility of the ____.
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Chief Operating Officer (COO)
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Management accountants often work with ____.
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Cross functional teams
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The _____ and the _____ report to the CEO.
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COO and CFO
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A subcommittee of the board of directors is called the ____.
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Audit Committee
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You tell your brother that your company will report earnings significantly above financial analysts' estimates.
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Confidentiality
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You see that other employees take office supplies for personal use. As an intern, you do the same thing, assuming that this is a "perk".
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Integrity
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At a conference on sustainability, you skip the afternoon session and go sightseeing. Your company paid for the registration fee, and you are getting paid for the day.
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Integrity & Competence
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You failed to read the detailed specifications of a new software package that you asked your company to purchase. After it is installed, you are surprised that it is incompatible with some of your company's older accounting software.
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Competence
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You do not provide top managers with the detailed job descriptions they requested because you fear they may use this information to cut a position from your department.
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Credibility
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Even though Kayla's company is adopting IFRS this year, Kayla has not completed the required IRS training.
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Competence
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David, a purchasing agent for his company, received two tickets from a supplier to the upcoming Ohio State vs Michigan game. These tickets sell for $500 each.
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Integrity
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The CFO directed that certain expenses be reclassified as assets, so that target profit could be achieved. The CFO rationalized that jobs would be saved by reaching the targeted income figures.
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Competence
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Tara, an accountant for a smartphone manufacturer, told her friends about a new model of smartphone being released by the company in the following quarter. For competitive reasons, the company keeps its models shrouded in secrecy until the release date.
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Confidentiality
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Daniel provides an analysis of the profitability of a company owned store that is managed by Daniel's best friend. Neglects to include allocated fixed costs in friends report. If included store would have showed a loss and friends job would be in danger.
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Credibility
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____ systems report on various segments or business units of the company.
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Managerial accounting
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When managers evaluate the company's performance compared to the plan, they are performing the ____ role of management.
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Controlling (comparing)
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Information on a company's past performance is provided to external parties by ____.
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Financial Accounting (external)
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_____ systems are chosen by comparing the costs versus the benefits of the system and are not restricted by GAAP or IFRS.
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Managerial Accounting
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CPAs audit the ____ statements of public companies.
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Financial Accounting (CPAs outside of company)
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Financial accounting develops reports for external parties such as ____ and ____.
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Shareholders, Creditors
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Companies must follow GAAP and IFRS in their ____ systems.
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Financial Accounting
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Decision makers inside a company are the ____.
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Managers (inside company)
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Choosing goals and the means to achieve them is the ____ function of management.
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Planning
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SEC examiner.
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Financial (outside of company examiners)
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Bookkeeping Department.
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Financial accounting
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Division Controller.
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Managerial & Financial accounting
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External Auditor (public accounting firm).
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Financial accounting (external)
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Loan officer at the company's bank.
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Financial accounting (outside of company)
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State tax agency auditor.
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Financial accounting (outside of company)
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Board of Directors.
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Managerial & Financial accounting
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Manager of the service Department.
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Managerial accounting (manager)
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Wall Street analyst.
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Financial accounting
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Internal auditor.
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Managerial & Financial accounting (Internal managerial) Audit (financial)
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Potential investors.
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Financial accounting
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Current stockholders.
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Financial accounting (stockholders/stock)
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Reporter from the Wall Street Journal
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Financial accounting (outside)
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Regional Division managers.
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Managerial accounting (manager)
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Provide on site wellness coaching for employees to improve employee health.
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Social
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Diverted more than 2.5 million beverage containers from landfills by placing 3,000 recycling bins.
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Environmental
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Generated a positive economic benefit in every community.
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Economic
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Reduced beverage calories in U.S. schools by 88%.
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Social
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Prohibited marketing to children under the age of 12.
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Social
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Deployed hybrid electric trucks, which generate approximately one third fewer CO2 emissions.
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Environmental
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Minimized the amount of water used in the manufacturing and cleaning processes, resulting in saving water.
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Environmental
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Recruited from a wide cross section so you have both men and women and minority groups in management.
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Social
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Display total calorie counts on vending machines so customers can make informed choices.
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Social
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Generated a profit for the company's shareholders.
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Economic
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Removed side walls which resulted in saving 2.4 metric tons of corrugated packaging.
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Environmental
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Provided training and career planning for employees to provide a rewarding work life.
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Social
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Reduced bottle cap size to save total plastic savings by 11,000 metric tons.
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Environmental
